Asian LNG Demand 2016

April 2016
Asian LNG Demand:

Key Drivers and Outlook
OIES PAPER: NG 106
Howard V Rogers
The contents of this paper are the authors sole responsibility. They do not
necessarily represent the views of the Oxford Institute for Energy Studies or any of
its members.
Copyright 2016
Oxford Institute for Energy Studies
(Registered Charity, No. 286084)
This publication may be reproduced in part for educational or non-profit purposes without special
permission from the copyright holder, provided acknowledgment of the source is made. No use of this
publication may be made for resale or for any other commercial purpose whatsoever without prior
permission in writing from the Oxford Institute for Energy Studies.
ISBN 978-1-78467-055-9
March 2016: Asian LNG Demand: Key Drivers and Outlook
Preface
The LNG Industry has long regarded the Asian markets of Japan, South Korea, Taiwan, China and
India as high growth importing markets, willing to sign long term contracts with price terms linked to
crude oil prices. The rebound in Asian LNG demand in 2010, following the post-financial crisis year of
2009, re-affirmed this paradigm with LNG markets further tightening following the Fukushima tragedy.
The signal for new LNG supply projects could not have been clearer in 2010 and 2011.
While the LNG supply projects triggered by such high demand growth and price signals were being
constructed however, Asian demand for LNG began to wane. This appeared to be partly a
consequence of mild winters but also LNG import prices and a general regional economic slowdown,
perhaps led by China, also contributed.
The somewhat simplistic assumption that Asian markets would always obligingly provide consistently
high LNG demand growth has become questionable. Attempting to understand the new dynamics of
these markets however is challenging for a number of reasons, including data transparency and
consistency, rational energy policies and in many cases the potential impending decline in domestic
gas production in some countries.
This paper seeks to provide a ground level understanding of the existing, emerging and potential
Asian LNG markets. The OIES Natural Gas Programme always seeks to anticipate new trends in the
global gas system and this paper represents an assessment of the potential high growth LNG
markets of the future which may require a new response from the upstream industry.
James Henderson
Oxford April 2016
ii
Contents
Preface ................................................................................................................................................... ii
Glossary ............................................................................................................................................... vii
Introduction ........................................................................................................................................... 1
1. Mature Asian LNG Markets ............................................................................................................. 2
1.1 Introduction ................................................................................................................................... 2
1.2 Japan............................................................................................................................................. 3
1.2.1 Energy Mix .............................................................................................................................. 3
1.2.2 Gas Consumption, Energy Policy and Future Outlook ........................................................... 4
1.2.3 Gas Supply ........................................................................................................................... 11
1.2.4 Japan Conclusions ............................................................................................................ 13
1.3 South Korea ................................................................................................................................ 14
1.3.1 Gas Consumption ................................................................................................................. 15
1.3.2 Gas Supply ........................................................................................................................... 17
1.3.3 Energy Policy and Future Gas Demand Drivers ................................................................... 17
1.3.4 South Korea - Conclusions ................................................................................................... 19
1.4 Taiwan ......................................................................................................................................... 20
1.4.1 Gas Consumption ................................................................................................................. 21
1.4.2 Gas Supply ........................................................................................................................... 23
1.4.3 Energy Policy and Future Gas Demand Drivers ................................................................... 23
1.4.4 Taiwan - Conclusions ........................................................................................................... 25
1.5 Conclusions Mature Asian LNG Markets ................................................................................. 26
2. More Recent and Emerging Asian LNG Markets ......................................................................... 27
2.1 Introduction ................................................................................................................................. 27
2.2 China ........................................................................................................................................... 27
2.2.1 Gas Consumption ................................................................................................................. 28
2.2.2 Historical Chinese Natural Gas Supply and Demand ........................................................... 30
2.2.3 Chinese Energy Policy .......................................................................................................... 31
2.2.4 Future Chinese Natural Gas Demand .................................................................................. 31
2.2.5 Chinas Future Natural Gas Supply Mix ............................................................................... 32
2.2.6 China Conclusions ................................................................................................................ 36
2.3 India............................................................................................................................................. 37
2.3.1 Energy Mix and Gas Supply and Demand ........................................................................... 37
2.3.2 Indias Energy Policy and Future Gas Demand Outlook ...................................................... 41
2.4 Singapore .................................................................................................................................... 42
2.4.1 Gas Consumption and Supply .............................................................................................. 42
2.4.2 Singapore Outlook ................................................................................................................ 44
2.5 Thailand ...................................................................................................................................... 45
2.5.2 Thailand Outlook ................................................................................................................... 48
2.6 Indonesia ..................................................................................................................................... 49
2.6.2 Indonesia Outlook ................................................................................................................. 54
2.7 Malaysia ...................................................................................................................................... 55
2.7.2 Outlook for Malaysian Gas ................................................................................................... 59
2.8 Pakistan ...................................................................................................................................... 61
2.8.2 Pakistan Outlook ................................................................................................................... 64
2.9 Bangladesh ................................................................................................................................. 65
2.9.2 Bangladesh Outlook ............................................................................................................. 67
iii
2.10 Vietnam ..................................................................................................................................... 67

2.10.1 Gas Consumption and Supply ............................................................................................ 68
2.10.2 Vietnam Outlook ................................................................................................................. 68
2.11 Conclusions - More Recent and Emerging Asian LNG Markets ............................................... 69
3. Summary and Conclusions ........................................................................................................... 70
Bibliography ........................................................................................................................................ 74
Figures
Figure 1: Japans Energy Mix 1995 2014 ............................................................................................ 3
Figure 2: Japan City Gas Consumption 2000 2013 (Fiscal Years) .................................................. 4
Figure 3: Japan Industry Sources of Energy FY 2000 - 2013................................................................. 5
Figure 4: Japan Gas Consumption in Power and City Gas Sectors FY 2000 - 2013 ............................. 6
Figure 5: Japan Power Generation by Fuel/Technology (FY 2000 2013) ........................................... 6
Figure 6: Fuel Consumption for Electricity Generation (General Electric Utilities) ................................. 7
Figure 7: Japan Nuclear Re-Start Scenarios .......................................................................................... 9
Figure 8: Future Power Generation Gas Consumption for Six Cases .................................................. 10
Figure 9: Historical and Future Japan Gas Demand ............................................................................ 11
Figure 10: Japan Synthetic Gas, Domestic Production and LNG Imports ............................................ 12
Figure 11: Japans LNG Supply Outlook and Demand Uncertainty 2010-2030 ................................... 13
Figure 12: South Korea Primary Energy Mix 19952014 ..................................................................... 15
Figure 13: South Korea Non-Power Sector Gas Consumption 20002014 ...................................... 15
Figure 14: South Korea Industrial Sector Energy Consumption 20002014 ..................................... 16
Figure 15: South Korea Gas Consumption in Power and Non-Power Sectors 2000-2014 .................. 16
Figure 16: South Korea Fuel Consumption for Power Generation 2000-2014 ..................................... 17
Figure 17: Historic and Illustrative Future South Korea Gas Consumption .......................................... 18
Figure 18: South Koreas LNG Supply Outlook and Demand Uncertainty 2010 2030 ...................... 19
Figure 19: Taiwan Primary Energy Consumption 1995-2014 ............................................................... 21
Figure 20: City Gas Consumption by Sector 2000 2014 ................................................................... 21
Figure 21: Taiwan Gas Consumption in Power and Non-Power Sectors 2000 - 2014......................... 22
Figure 22: Taiwan Power Generation by Fuel or Technology Type 2000 - 2014 ................................. 22
Figure 23: A Possible Future Generation Outlook to 2030 for Taiwan ................................................. 24
Figure 24: Taiwan Gas Demand Outlook to 2030 ................................................................................ 24
Figure 25: Taiwan Future LNG Demand and Contractual Position ...................................................... 25
Figure 26: Primary Energy Mix of China 1995 to 2014 ......................................................................... 27
Figure 27: China Gas Consumption by Sector 2000 - 2014 ................................................................. 28
Figure 28: China Gas Consumption by Industry Segment 2000-2012 ................................................. 29
Figure 29: China Power Generation by Fuel/Technology 2000-2012 .................................................. 29
Figure 30: China Natural Gas Supply and Demand 2000-2014 ........................................................... 30
Figure 31: China Historical and Future Natural Gas Demand from Various Sources .......................... 32
Figure 32: Historical and Future China Domestic Natural Gas Production .......................................... 33
Figure 33: China Supply and Demand 2000 to 2030, Low Case ...................................................... 34
Figure 34: China Supply and Demand 2000 to 2030, High Demand Assumption............................. 35
Figure 35: Chinas LNG Import Requirements on Base and High Future Demand Cases and
Contractual Commitments..................................................................................................................... 36
iv
Figure 36: Primary Energy Mix of India 1995 to 2014 .......................................................................... 37

Figure 37: Estimated India Natural Gas Consumption by Sector 2004/05 to 2013/14 ......................... 38
Figure 38: India Domestic Gas Production 2004/05 to 2013/14 ........................................................... 39
Figure 39: India Demand Outlooks and Domestic Gas Production 2005 to 2030 ................................ 40
Figure 40: India Future LNG Import Requirements and Contractual Commitments............................. 41
Figure 41: Singapore Gas Consumption 2009 - 2014 .......................................................................... 43
Figure 42: Singapore Sources of Gas Supply 2000 - 2014 .................................................................. 44
Figure 43: Outlook for Singapore Gas Demand and Supply ................................................................ 44
Figure 44: Thailand Primary Energy Mix 1995 - 2014 .......................................................................... 46
Figure 45: Thailand Natural Gas Consumption 2000 - 2014 ................................................................ 47
Figure 46: Thailand Gas Supply 2000 - 2014 ....................................................................................... 48
Figure 47: Thailand Gas Supply and Demand Outlook 2009 - 2030 .................................................... 49
Figure 48: Indonesia Primary Energy Mix 1995-2014 .......................................................................... 50
Figure 49: Indonesia Domestic Gas Consumption 2000 - 2013 ........................................................... 51
Figure 50: Indonesia Production and Consumption of Natural Gas 2000 - 2013 ................................. 52
Figure 51: Indonesia Production and Use of Natural Gas 2000 - 2013 ................................................ 53
Figure 52: Indonesia LNG Exports 2006 - 2014 ................................................................................... 54
Figure 53: Natural Gas Balance 2000-2030 ......................................................................................... 55
Figure 54: Malaysia Energy Balance 1995 - 2014 ................................................................................ 56
Figure 55: Malaysia Gas Supply: Production, Pipeline and LNG imports 2000-2014 .......................... 57
Figure 56: Malaysia Gas Demand and Exports: Consumption, Pipeline and LNG Exports 2000 - 2014
.............................................................................................................................................................. 57
Figure 57: Malaysia Power Generation by Fuel/Technology 2000 - 2012 ............................................ 58
Figure 58: Malaysia LNG Contract ACQs 2010-2030 ........................................................................... 59
Figure 59: Malaysia Supply Outlook to 2030 ........................................................................................ 60
Figure 60: Malaysia Demand and Export Outlook to 2030 ................................................................... 60
Figure 61: Pakistan Primary Energy Consumption 1995-2014............................................................. 61
Figure 62: Pakistan Natural Gas Production and Consumption 1995 2014 ...................................... 62
Figure 63: Pakistan Gas Consumption Shares 1999/2000 2011/2012 ............................................. 63
Figure 64: Pakistan Gas Supply and Demand Outlook 1995 - 2030 .................................................... 64
Figure 65: Bangladesh Primary Energy Consumption 19952014 ...................................................... 65
Figure 66: Bangladesh Gas Consumption 1995 2014 ....................................................................... 66
Figure 67: Bangladesh Potential Gas Supply and demand to 2030 ..................................................... 67
Figure 68: Vietnam Primary Energy Consumption 1995 2014 .......................................................... 68
Figure 69: Asian LNG Imports 2010-2030 Low Case ........................................................................ 70
Figure 70: Asian LNG Imports 2010-2030 High Case ....................................................................... 71
Figure 71: Asian LNG Imports 2010-2030 Differences between Low and High Cases ..................... 72
Tables
Table 1: Japan Low and High LNG Import Cases ................................................................................ 14
Table 2: South Korea LNG Imports Low and High Cases ................................................................. 20
Table 3: Taiwan LNG Import Outlook Low and High Cases .............................................................. 26
Table 4: China Supply and Demand on Base Case Demand Assumptions bcm/y .............................. 34
Table 5: China Supply and Demand on High Case Demand Assumptions bcm/y ............................... 35
Table 6: China LNG Import Cases ........................................................................................................ 37
Table 7: India LNG Import Requirements ............................................................................................. 42
Table 8: Singapore LNG Import Outlook ............................................................................................... 45
Table 9: Thailand LNG Import Outlook ................................................................................................. 49
Table 10: Indonesia LNG Import Outlook ............................................................................................. 55
Table 11: Malaysia LNG Import Outlook ............................................................................................... 61
Table 12: Pakistan LNG Import Outlook ............................................................................................... 65
Table 13: Bangladesh LNG Import Outlook .......................................................................................... 67
Table 14: Vietnam LNG Import Outlook ................................................................................................ 69
Table 15: High and Low LNG Import Cases to 2030 (bcm/y) ............................................................... 73
vi
Glossary
ACQ
Annual Contract Quantity
bcf
Billion cubic feet
bcf/d
Billion cubic feet/day
bcm
Billion cubic metre
bcma
Billion cubic metres/annum (year)
bcm/year
Billion cubic metres/year
bn
Billion meaning 1000 million or 10 E9
US$
$/MMBtu
Value of LNG expressed as US$ per million Btu
E&P
Exploration and Production
EIA
US Energy Information Administration
FID
Final Investment Decision
Gas Storage
The storage of natural gas in either underground structures such as depleted

oil or gas reservoirs, salt caverns or aquifers, or alternatively as LNG either in
storage tanks at regasification terminals or LNG Peak Shaving facilities.
GHG
Greenhouse gas
GIIGNL
Groupe International des Importateurs de Gaz Naturel Liqufi (International

Group of Liquefied Natural Gas Importers)
Henry Hub
The pricing point for natural gas futures contracts traded on NYMEX. It is a
point on the natural gas pipeline system in Erath, Louisiana where it
interconnects with nine interstate and four intrastate pipelines. Spot and
future prices set at Henry Hub are denominated in $/MMBtu and are generally
seen to be the primary price set for the North American natural gas market
HoA
Heads of Agreement
Hub
The location, physical or virtual, where a traded market for gas is established
IEA
International Energy Agency
JCC
Japan Customs-Cleared Crude Oil price the average price of customscleared crude oil imports into Japan formerly the average of the top 20
crude oils by volume as reported in customs statistics; nicknamed the
Japanese Crude Cocktail. It is the commonly used price formation
mechanism in long-term LNG contracts in Japan, Korea, and Taiwan.
Kl
1,000 litres
kWh
Kilowatt hour
Liquefaction Plant
A large scale processing plant in which natural gas is cryogenically cooled to

minus 161 Celsius where it becomes a liquid at atmospheric pressure.
vii
mmcm
Million cubic metres
mcm
Thousand cubic metres
MMBtu
Million British thermal units
MOU
Memorandum of Understanding
mt
Million tonne
mtoe
Million tonnes of oil equivalent
mtpa
Million tonnes per annum
MW
Megawatts
MWh
Megawatt hours
NGLs
Natural gas liquids
Oil-Indexed Gas Prices Gas prices within long-term contracts, which are determined by formulae
containing rolling averages of crude oil or defined oil product prices
Regasification
The process of reinstating LNG to a gaseous state for injection into a

distribution system for end-user consumption.
Reserves
The amount of gas underground that can be commercially recovered
Short term LNG
An LNG cargo (or series of cargoes) sold under contract(s) of less than four
years duration
Spot LNG
Single cargo of LNG sold outside of a term contract
tcf
Trillion cubic feet
tcm
Trillion cubic metres
TOP
Take-or-pay (or minimum bill), the quantity of gas which, during a gas
contract year, the buyer is obliged to pay for regardless of whether it
physically takes the gas.
Upstream
Facilities including drilling, well completion and gas gathering to supply the
feed gas the liquefaction plant
viii
Introduction
The research for this paper was undertaken to produce a substantive part of a chapter on Asian LNG
markets for the OIES-KAPSARC book LNG Markets in Transition the Great Reconfiguration, to be
published in September 2016. This paper includes country-level detail and analysis which could not
be included in the book chapter due to space constraints, however it is important to make such
analysis available to researchers and analysts following Asian LNG markets and to highlight data
sources from in-country government departments, often overlooked from a European or North
American perspective.
Although not the first markets to receive LNG, Japan, South Korea. Taiwan and more latterly China
and India have dominated the LNG import picture in recent times. It could be argued that the
spectacular (and largely unforeseen) rebound of Asian LNG demand in 2010 of some 18% (over
2009) in these markets, together with higher oil-indexed LNG contract prices and the tightening of the
LNG spot market after the Fukushima tragedy, were the market signals which spurred the wave of
FIDs for LNG supply projects which have or will come on-stream in the 2015 2020 period.
Expectations of demand growth trends extrapolated from the early 2010s, however, were largely
undermined prior to the completion of these projects. In addition to recent mild winters, Chinas
transition to the new normal and a wider slowdown in economic growth has significantly reduced
LNG demand compared to prior expectations. With some 170 bcm/y of new LNG supply due to come
on-stream prior to 2020, the uncertainty over the future Asian LNG demand trajectory is a
fundamental component impacting the global LNG-connected system. LNG produced (at very low
variable cost), but not required, by Asian markets will, at the margin, find a home in Europe which has
some 200 bcm/y of regas capacity, currently only utilised at 25%. The potential for, and
consequences of, competition with Russian pipeline gas in the European gas market have been
discussed extensively in Rogers (2015) and Henderson (2016).
Leaving aside the wider consequences of future LNG balances and trade-flows discussed in these
publications, this paper focusses on the Asian LNG importing markets. The key research questions
addressed for each importing country are:
How important is gas in the energy balance and how has this evolved by sector in the past
decade or so?
What is the outlook for future gas demand, given government energy policy, economic growth
outlook and other factors specific to the country in question?
Given the competing sources of gas supply and their specific demographics, what is the outlook
for LNG import requirements?
Taking the Asian LNG importers as a group, what are the key drivers of LNG demand growth and
what is the likely range (i.e. low and high outlooks)?
To address these questions the paper divides the Asian LNG markets into those classified as mature
Japan, South Korea and Taiwan (Chapter1); and those termed more recent and emerging China,
India, Singapore, Thailand, Indonesia, Malaysia, Pakistan, Bangladesh and Vietnam (Chapter 2).
Each is assessed with the above research questions in mind. Where possible the author has used incountry sources to build an understanding of each market. Chapter 3 provides the summary and
conclusions.
It is hoped that the paper provides insight and at least a framework for analysing and monitoring these
markets which, if not currently deemed to offer the high levels of future LNG demand anticipated from
the standpoint of the early 2010s, will nevertheless constitute a key element of the global LNG
balance for the foreseeable future. As such they will significantly impact the fundamentals and pricing
dynamics of the increasingly connected global regional gas markets.
1
1. Mature Asian LNG Markets

1.1 Introduction
This section describes the markets generally viewed as the mature Asian LNG importers, namely
Japan, South Korea and Taiwan, addresses the factors which have influenced their LNG consumption
trends to date and derives views of possible future demand paths. These three markets commenced
LNG imports in 1969, 1986 and 1990 respectively. As a group they accounted for in excess of 60% of
global LNG imports from 1980 to 2006.
These countries have minimal domestic gas resources and depend on natural gas to differing
degrees in their power and non-power sectors. All three markets have enjoyed economic growth
based on export-oriented manufacturing and technology goods production, however with the
slowdown in Chinese economic growth and the limits to growth inherent in this economic model, there
are questions regarding their future economic performance. Japan in particular is struggling to
stimulate domestic demand in the face of high personal and corporate savings levels and ongoing
deflationary tendencies. Declining population trends are also a relatively new challenge for these
countries which threaten domestic consumption growth and workforce renewal.
The largest uncertainty impacting future gas (LNG) consumption trends, however, is the uncertainty in
future energy consumption growth and energy mix. With the challenge of GHG emission reduction,
especially post COP21, strategies incorporating energy efficiency and renewables have been
proposed with nuclear aspirations constrained either by public opinion or (in the case of Japan) restart logistics and approval processes. While an indicative share for gas in the energy mix is often
included in policy documents, competition with (cheaper) coal in the power sector is an open issue
which requires a more robust policy framework than generally exists at present. Typically the
continued presence of coal in the energy mix is offset by assumed future energy efficiency gains and
aggressive renewable capacity growth. The reality of such aspirations will presumably become clear
once National Determined Contributions agreed at COP21 are tracked by the Monitoring, Reporting
and Verification process, albeit from 2020 at the earliest1.
The following sections describe the individual markets with the objective of addressing the drivers of
future LNG demand. With this as the primary focus, it is inappropriate to dwell on the details of
individual LNG contracts and import infrastructure. For such information the reader is directed to
GIIGNL which provides an annual update on these and other aspects of the LNG market at a country
level.
IIGC (2015), pp. 4-5.
1.2 Japan
1.2.1 Energy Mix
Japan is the worlds third largest economy with a population of 126.2 million in 2014 2, though this is
viewed as being in long term decline. Decades of low economic growth and heavy government
spending to support the economy have left Japan with the worlds highest public debt at almost 250%
of GDP. The Abe government in 2012 commenced a three-part plan of stimulus spending, monetary
easing and structural reforms. In mid-2015 commentators appeared cautiously optimistic that Japans
growth of 3.9% (annualised) in 1Q 2015 3 heralded a sustained recovery after 2014s zero GDP
growth. September 2015 GDP data however indicated a 1% annualised growth, consumer spending
and investment remaining sluggish and exports dampened by decelerating growth in China 4. Japans
GDP comprises Agriculture 1.1%, Industry 25.6% and Services 73.2% 5. Japans manufacturing sector
has a significant element of high energy intensive industries, such as metals, chemicals and
machinery manufacture.
Japans primary energy mix is shown in Figure 1. Total energy consumption reached a plateau in the
mid-2000s with gas and coal gaining share from oil and nuclear. The post financial crisis year of 2009
reduced energy consumption from all sources, but 2010 showed a significant recovery. On March 11,
2011 the Great East Japan Earthquake and the resulting Tsunami resulted in a nuclear accident at
the Fukushima Daiichi Nuclear Power Station. This led to the policy-induced shutdown of all Japans
nuclear generation plant 6 . The loss of nuclear generation was partially compensated for by an
increase in gas, coal and oil-fired generation. 2014 total energy consumption was below the level of
2009.
Figure 1: Japans Energy Mix 1995 2014
Mtoe
600
Geothermal, Biomass & Other

Renewables
500
Wind
400
Solar
Hydro
300
Nuclear
200
Coal
100
Oil
0
1995
2000
2005
2010
Gas
Source: BP (2015)
Japans population slide set to accelerate, FT, July 2nd, 2015, http://www.ft.com/cms/s/0/41aace5e-208f-11e5-aa5a398b2169cf79.html?siteedition=uk#axzz3fr7DgV1U
3
Japan economy grows 3.9% in first quarter, FT, June 8th 2015, http://www.ft.com/cms/s/0/6a1ae4a0-0d89-11e5-b85000144feabdc0.html#axzz3frCyYjrF
4
2016s economic outlook The Japan Times, 11th January, 2016,
http://www.japantimes.co.jp/opinion/2016/01/11/editorials/2016s-economic-outlook/#.VpYtThWLSCo
5
CIA (2015b)
6
For a comprehensive review of the impact of Fukushima see Miyamoto, A., Ishiguro, C. & Nakamura, M, (2012)
2
1.2.2 Gas Consumption, Energy Policy and Future Outlook

Japanese gas demand has a space heating seasonal peak in winter (peak month generally February)
and a less pronounced peak in summer, due to additional power generation usage for air
conditioning7. Japan manages seasonal demand fluctuations by varying the stock of LNG held in
storage tanks at regas terminals and by increasing the frequency of cargo deliveries during high
demand periods.
City gas consumption became increasingly dominated by the industrial sector through the 2000s with
the residential and commercial sectors having remained stagnant from 2000 (Figure 2). The average
annual growth rate in industrial sector gas consumption was 10 % from 2000 to 2007, slowing to 2.6
% from 2008 to 2013.
Figure 2: Japan City Gas Consumption 2000 2013 (Fiscal Years)
40
35
30
Bcma
25
Others
20
Industry
Commercial
15
Residential
10
0
2000
2005
2010
Fiscal Year
Source: IEEJ (2015a), P 184

Note: The Japanese Fiscal year runs from April to March of the following year. Fiscal Year 2013 ends in March
2014.
Miyamoto, A. (2008), Figure 4.1, P 127.
Figure 3: Japan Industry Sources of Energy FY 2000 - 2013

200,000
180,000
160,000
140,000
kcal * 10 6
120,000
Others
Electricity
100,000
Coal & Coal Products
80,000
Oil Products
Natural Gas & Towns Gas
60,000
40,000
20,000
0
2000
2005
2010
Fiscal Year
Source: IEEJ (2015a), P 68
In FY 2013 gas accounted for only 11.6% of industry sector energy, growing from a much lower base
in the early 2000s (Figure 3). Industrial energy consumption has reduced considerably since FY 2007.
In general gas has gained share from oil products but coal consumption has grown.
The scope for further future growth of gas in the industrial sector was addressed in a 2012 OIES
paper8 where the importance of access to gas (infrastructure) and price competitiveness relative to
other fuels were viewed as key determinants of future consumption growth. The authors concluded
that industrial demand would continue to grow at 2.85% pa to 2020, but that residential demand would
reduce by 0.57% pa and the commercial sector grow at 0.42%p.a.; with an aggregate city gas sector
growth of 1.6%pa.
Figure 4 demonstrates the scale of gas consumption in the power sector relative to that of city gas as
discussed above.
Miyamoto, A., Ishiguro, C. & Nakamura, M, (2012)
Figure 4: Japan Gas Consumption in Power and City Gas Sectors FY 2000 - 2013
140
120
Bcma
100
80
60
40
20
0
2000
2005
2010
Fiscal Year
City Gas
Power
Source: Produced from a balance derived from IEEJ (2015a), pp. 178, 180, 184
Gas consumption in the power sector remained reasonably constant in the period 2000 to 2006, grew
modestly to 2010 and then expanded dramatically by some 20 bcm/y after Fukushima. Figure 5
shows annual power generation from various fuels/technologies. The impact of the Fukushima
disaster and subsequent progressive closure of Japans nuclear fleet is clearly shown.
Figure 5: Japan Power Generation by Fuel/Technology (FY 2000 2013)
1,400,000
1,200,000
1,000,000
Balance
800,000
GWh
Hydro
Nuclear
Thermal (undifferentiated)
600,000
Coal
Oil
400,000
LNG
200,000
0
20002001200220032004200520062007200820092010201120122013
Fiscal Year
Source: IEEJ (2015a), pp. 196 & 197.

Note: the disaggregated data for LNG, oil, coal and thermal is not available for FYs 2011 and 2012.
Figure 6: Fuel Consumption for Electricity Generation (General Electric Utilities)

140
120
100
80
Mtoe
LNG
Crude Oil
60
Heavy Fuel Oil

Coal
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Fiscal Year
Source: IEEJ (2015a), P. 210
Figure 6 shows the consumption of fuels in thermal generation. The graph also enables us to deduce
that the loss of nuclear generation post Fukushima was compensated for by broadly comparable
increases in crude and heavy fuel oil on the one hand and natural gas on the other.
In July 2011, immediately following the Fukushima disaster, the Energy & Environment Council
(Enecan) was established to recommend on Japans future energy strategy; recommending a phaseout of nuclear power by 2040. Operable reactors would be allowed to restart once they had gained
permission from the Nuclear Regulation Authority (NRA), but a 40 year operating limit would be
imposed. Enecan proposed a green energy policy framework focused on LNG and coal and an
expanded use of renewables. This provoked a strong response from industry with a consensus that a
20 to 25% share of nuclear was necessary to avoid severe economic penalties. The succeeding
government (Liberal Democratic Party) abolished Enecan, placing the responsibility for energy policy
matters in the hands of METI.
In June 2015 the governments draft plan for electricity generation to 2030 was approved, which has
nuclear at 20-22% by 2030, renewables at 22-24%, LNG at 27% and coal at 26% with an aim to
reduce CO2 emissions by 21.9% by 2030 from the 2013 level and to improve energy self-sufficiency
measures to 24.3% from 6.3% in 2012 9 . The plan aims to achieve ambitious energy efficiency
savings. By 2030 economic growth would normally be assumed to increase energy demand to 411.3
Kl (oil equivalent) from the 2013 figure of 361 Kl (oil equivalent). Efficiency measures are assumed to
reduce this to 326 Kl (oil equivalent) by 2030 10.
Achieving these goals will be challenging, however. Early difficulties with renewable expansion
surfaced in October 2014 when at least seven of the then major utilities limited the access of
renewable energy to their grids due to potential overloads 11. Solar capacity tripled in the fiscal year
ending in March 2014 due to the high feed in tariff introduced in 2012. Even so, renewables
Nuclear Power in Japan, July 2015, World Nuclear Association, http://www.world-nuclear.org/info/Country-Profiles/CountriesG-N/Japan/

10
IEEJ (2015b), Slide 8.
11
IEEJ (2015b), Slide 8.
9
(excluding hydro), only accounted for 2.2% of Japans electricity output in fiscal year 2013 12 . Of
perhaps greater concern, the energy efficiency goals in the 2015 draft plan assume a similar path to
that which was achieved in the period 1970-199013. Achieving this will likely be difficult, Japan being
already regarded as the 6th most energy efficient nation in a global survey14.
The process for re-starting nuclear plant comprises a safety assessment by the NRA and the briefing
of local governments by the operators. The NRA process includes the review of detailed design, site
inspection and an assessment of operating management systems. Local government consent is
required before restart can occur. Kyushu Electric Power Co.s Sendai 1 began full commercial
operations on Sept 10th 2015 and Sendai 2 on Nov 17th 15. These are both 890 MW reactors. By end
November both plant had reached full capacity. Kansai Electric Power Co received local approval for
the restart of its Takahama 3 and 4 reactors but start-up was delayed until late January and late
February 2016 pending preparations for final on-site checks by Japans Nuclear Regulatory Authority.
The court decision to start up the plant was opposed by public opinion. The Ikata 3 reactor gained
approval for restart from the Ehime Prefecture on 29th October 2015. The 846 MW reactor was
expected to start in early 2016.
There are still uncertainties as to the pace and extent of the nuclear restart process. Of the 42
operable reactors, in October 2015 Reuters reported (based on NRA inspection data, court rulings
and interviews with local authorities, utilities and energy exports), that 7 reactors are likely to restart
over the next few years (down from 14 in a similar 2014 survey). The fate of the remaining potentially
operable reactors appears uncertain16.
Under a high case scenario developed by Itochu, about 10 reactors could be re-started every year
with a total of 35 units back online within five years 17. Delays observed to the process to date seem
likely to continue, however.
Assuming (for the purpose of this analysis) Japans renewable growth and coal and oil power sector
constraint ambitions are achieved, the outlook for LNG in the power sector depends primarily on the
achievement of energy efficiency goals and the pace of nuclear re-starts.
To explore the sensitivities, the following scenarios for nuclear re-starts were considered:
Fast Re-start where Japan achieves 35.45 GW of operational capacity by 2020 which operates
at an assumed historic average of 70% send-out (with modest assumed additional efficiency
growth to 2030).
Slow Re-start where a similar level of nuclear capacity is achieved more gradually i.e. by
2030.
Partial Restart where only 50% of the previous scenarios capacity is achieved.
The trends in nuclear generation for these scenarios are shown in Figure 7.
Outlook cloudy for Japans renewable energy drive, FT, April 20th, 2015, http://www.ft.com/cms/s/0/dae47c8c-d927-11e4b907-00144feab7de.html#axzz3g2zV8Sl6
13
IEEJ (2015b), Slide 13
14
The International Energy Efficiency Scorecard, ACEEE, http://aceee.org/portal/national-policy/international-scorecard
15
Japan Nuclear Update, Nuclear Energy Institute, December 15th 2015. http://www.nei.org/News-Media/News/Japan-NuclearUpdate
16
Japan Nuclear Power Outlook Bleak Despite First Reactor Restart. Reuters Sept 1 2015 http://www.reuters.com/article/usjapan-nuclear-restarts-analysis-idUSKCN0R022Q20150901
17
Nuclear Power in Japan, July 2015, World Nuclear Association, http://www.world-nuclear.org/info/CountryProfiles/Countries-G-N/Japan/
12
Figure 7: Japan Nuclear Re-Start Scenarios
GWh Nuclear Generation
250,000
200,000
150,000
Fast
Slow
100,000
Partial
50,000
0
2015
2020
2025
2030
Source: Authors Assumptions
Six scenarios were constructed by combining the three nuclear restart cases with two power
generation energy efficiency cases (No Efficiency saving; 1,278 GWh power generation in 2030 with
21 % nuclear on the Fast Re-start assumption, 23 % Renewables, 26 % Coal, 3 % Oil and 27 %
LNG 18) and a Target Efficiency Saving case with the three nuclear start-up assumptions.
The considerable variation in gas consumption in power generation for these cases is shown in Figure
8.
The future gas demand outlook for Japan in aggregate is shown in Figure 9. Note that the 2030 figure
of 62 mtpa (84 bcma) of LNG imports is consistent with the Japanese high energy efficiency scenario
described above is met only by two of the cases in Figure 9. Despite the potential for some demand
growth by 2020 (due to a slow or partial nuclear restart pace) the overall outlook is one of limited
scope for significant gas demand upside, at least based on the assumptions presented here. It should
also be noted that higher than average temperatures in the 4th quarter of 2015 suppressed space
heating demand which contributed to a decline in 2015 consumption compared to 2014 19.
IEEJ (2015b), Slide 9

Japans imports of liquefied natural gas reached 85.05 million mt in 2015, a drop of 3.9 percent as compared to the year
before, LNG World News, January 25th 2016, https://www.lngworldnews.com/japans-annual-lng-imports-drop-for-first-time-insix-years/
18
19
Figure 8: Future Power Generation Gas Consumption for Six Cases
100
Fast Nuclear restart, high demand
90
80
Fast Nuclear restart, low demand
70
Partial Nuclear Restart, High demand
Bcm/y
60
50
Partial Nuclear Restart, Low Demand
40
Slow Nuclear Restart, High demand
30
20
Slow Nuclear Restart, Low Demand

10
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Source: Authors Calculations
10
Figure 9: Historical and Future Japan Gas Demand

140
120
100
Power
Others
Industry
80
Commercial
Bcma
Residential

60

40
20
0
2000
2005
2010
2015
2020
2025
2030
Sources: Produced from Balance derived from IEEJ (2015a), pp. 178, 180, 184 & Authors Analysis
1.2.3 Gas Supply

Japan has some 3.2 bcma of associated and non-associated domestic gas production from numerous
small fields. Gas production peaked at 3.73 bcma in FY 2007 and is in slow decline. Japan also
produces minor volumes of synthetic gas, (in FY 2012 1.4 bcma), from petroleum (and until 2008)
from coal20. Overwhelmingly, however, Japan relies on imported LNG (Figure 10). It has 33 regas
terminals with an aggregate capacity of 267 bcma 21 , however, limits on the number of vessels
entering Tokyo Bay (under an agreement with the fishing industry), a ban on night time navigation and
possibly transmission system constraints appear to limit annual imports to around half of the
nameplate capacity stated here22. Regas capacity is driven by peak rather than average demand,
Japan having minimal geological gas storage capacity.
20
IEEJ (2015a), P. 180

GIIGNL (2014).
22
For example see Energy in Japan, 26 April 2012, Credit Suisse, https://doc.research-andanalytics.csfb.com/docView?sourceid=em&document_id=x446745&serialid=vPH7BrABSVBiMmvPreIYc4%2F6gyIbeVxKu8MBt
psV5G4%3D
21
11
Figure 10: Japan Synthetic Gas, Domestic Production and LNG Imports
140
120
Bcma
100
80
60
40
20
0
2000
2005
2010
Fiscal Year
Synthetic Gas
Domestic Production
LNG
Sources: Produced from Balance derived from IEEJ (2015a), pp. 178, 180, 184 & Authors Analysis
Japans most significant LNG suppliers, in volume terms are: Qatar, Australia, Malaysia and Russia;
however the portfolio is diversified and there are several other suppliers.
Given the uncertainty over future demand, particularly in the power sector given the variable rate and
extent of future nuclear re-starts, it is instructive to look at Japans contracted LNG supply position
(Figure 11) superimposed on the demand scenarios developed above. For 2010 to 2014 the yellow
bars represent historical volumes purchased on spot or other short term arrangements. These
volumes increased significantly post Fukushima. The green bars represent disclosed short term
contracts (term equal to or less than four years), some of which proceed beyond 2014. Dark blue
represents historical supplies purchased under medium and long-term contracts. Light blue
represents the future volumes committed to under medium and long term contracts (ACQs) in force
from non-US sources and red from US LNG export facilities.
12
Figure 11: Japans LNG Supply Outlook and Demand Uncertainty 2010-2030
140
Spot and other Short Term Supply
120
Identified Short Term Contracts

Existing Medium and & Long Term Contracts US
100
Existing Medium & Long Term Contracts NonUS

Historic Medium & Long Term Contracts
80
Bcma
Demand (Historical)
60

40

20

0
2010
2015
2020
2025
2030
Sources: Authors Analysis
Figure 11 suggests that Japans future contracted LNG position, is manageable at least to the early to
mid-2020s over the range of the future demand cases derived above. In the fast nuclear restart
cases, Japan has limited exposure to non-US long term contract commitments above its demand
requirements. This could be managed by exercising contract downward tolerance in its LNG contracts
in the 2018 to 2020 period. Its US LNG contract commitments by nature are destination flexible,
however in the fast nuclear restart cases, Japan would need to develop a strategy to trade-on these
volumes in what may be a low priced market (in terms of European hub and spot LNG prices). In the
slow and partial nuclear restart scenarios, Japan could continue to balance its LNG import
requirements using spot LNG cargoes to the early 2020s before possibly needing to sign up new
medium or long term contracts.
1.2.4 Japan Conclusions

Japan is the worlds largest LNG importer with gas in 2014 representing some 22% of its primary
energy mix. It is an industrialised economy which has suffered from low growth since the early 1990s.
Its economic prospects began to tentatively improve in 2015 following intense government policy
aimed at economic stimulus, however prospects for sustained recovery are still in doubt. Longer term
its low birth rate and population decline emphasise the need for exports rather than domestic
consumption to provide a key element of economic growth.
Japans energy policy has since 2011 been overshadowed by the aftermath of the Fukushima
disaster which required increased imports of LNG, crude and oil products to offset the loss of nuclear
generation at a time of historically high oil and LNG contract and spot prices. LNG provided some
50% of the additional power generation necessary to offset the loss of nuclear. Future LNG demand
will be directly influenced by the pace and extent of the nuclear re-start programme which seems at
present subject to uncertain delays.
13
A related and important issue is Japans Kyoto commitment and its need to reduce its CO 2 emissions
by 2020. Nuclear restart will be driven by considerations of safety assurance and political and public
approval issues at the prefecture level. A slow or partial restart will require Japan to focus on
renewables growth (whose scale potential may be questionable on the grounds of cost, land
availability and infrastructure issues) and the need to reduce the share of coal and oil in industry and
power sector consumption. This would provide additional scope for LNG demand growth but is difficult
to define at present.
A low and high LNG import requirement case is shown in Table 1.
Table 1: Japan Low and High LNG Import Cases
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Bcm/y Low Case 96.4 107.6 119.8 119.7 121.4 115.7 112.3 108.3 102.9 89.6 86.0 86.9 87.3 87.3 87.0 86.5 85.7 84.7 83.5 82.2 80.6
High Case 96.4 107.6 119.8 119.7 121.4 115.7 116.3 119.4 121.8 123.5 124.6 125.4 125.7 125.6 125.3 124.7 123.9 122.8 121.7 120.8 120.3
mtpa
Low Case 70.9 79.1 88.1 88.0 89.2 85.1 82.6 79.6 75.7 65.9 63.3 63.9 64.2 64.2 64.0 63.6 63.0 62.3 61.4 60.4 59.3
High Case 70.9 79.1 88.1 88.0 89.2 85.1 85.6 87.8 89.5 90.8 91.7 92.2 92.4 92.4 92.1 91.7 91.1 90.3 89.5 88.8 88.4
Note: The Low Case corresponds to the Fast Nuclear Restart, Low Power Demand scenario; the High Case
corresponds to the Partial Nuclear Restart, High Power Demand scenario .
1.3 South Korea

South Korea in the 1960s had a GDP per capita comparable with the poorer countries of Africa and
Asia. Since then it has generally enjoyed strong economic growth and increasing global integration to
become a high technology industrial power; currently the worlds 12 th largest economy. South Koreas
export oriented economy was hit by the 2008 global economic crisis but rebounded swiftly with GDP
growth in 2010 reaching 6.3%. Since 2010 growth has been muted due to economic and export
market slowdowns in the USA, China and the Eurozone, requiring a refocus away from exports
towards domestic oriented industry and services. Longer term challenges include an aging population,
inflexible labour market and the dominance of large conglomerates/incumbents 23.
The relative contributions of agriculture, industry and services to South Koreas economy were 2.6%,
39.2% and 58.2% in 2013. 24 Industries include textiles, steel, shipbuilding, car manufacturing and
electronics. South Korea has pursued a strategy of being a fast follower, with the government taking
on foreign loans and allocating capital to strategic industries, which led to a massive influx of foreign
capital goods and turnkey plants. In the 1990s the focus switched from imitating and assimilating
mature foreign technologies to in-house R&D, drawing upon emerging new technologies. However,
slower growth, reduced job prospects and the deteriorating performances of South Korean companies
all indicate that its past strategy is perhaps no longer effective. The government has responded with a
new vision labelled the creative economy; generating growth by facilitating cross-fertilisation of IT
and other areas25.
Figure 12 shows South Koreas primary energy consumption by fuel. In 2014 gas accounted for
15.7% of the energy mix and was 9% below 2013s consumption levels. Total energy consumption
has been essentially flat from 2011, despite the 7% rebound in 2010 after the post-crisis year low in
2009. This is in marked contrast to the period 1999 to 2008 during which energy consumption grew by
South Korea, Forbes, December 2014, http://www.forbes.com/places/south-korea/

CIA (2015b)
25
Lessons to be learned from South Koreas stellar rise, Sung Chulchung, February 23rd 2015, Europes World,
http://europesworld.org/2015/02/23/lessons-learned-south-koreas-stellar-rise/#.VakacPlVhBc
23
24
14
3%/year on average. While nuclear contributed 13% to the energy mix, this was dominated by coal
(31%) and oil (39.5%) in 2014.
Figure 12: South Korea Primary Energy Mix 19952014
300
Geothermal, Biomass &
Other Renewables
250
Wind
Mtoe
200
Solar
Hydro
150
Nuclear
100
Coal
Oil
50
Gas
0
1995
2000
2005
2010
Source: BP (2015)
1.3.1 Gas Consumption

Figure 13: South Korea Non-Power Sector Gas Consumption 20002014
35
30
25
Balance
Own Use & Losses
20
Bcma
Public
Transport
Industry
15
Commercial
District Heating
10
Residential
0
2000
2005
2010
Source: KEEI (2015), pp. 56 -57.
Figure 13 shows that gas consumption in the non-power sectors declined in 2014, partly due to a
warm winter. However, growth was significant from 2010 to 2012, both in the industrial and district
heating sectors. This said, the proportion of natural gas in total industrial energy consumption is low,
as shown in Figure 14.
15
Figure 14: South Korea Industrial Sector Energy Consumption 20002014

160
140
Million Tonnes Oil Equivalent
120
100
Renewables
Electricity
80
Coal
Oil Products
60
Natural Gas
40
20
0
2000
2005
2010
Source: Source: KEEI (2015), P. 25.
Gas in industrial use appears to have plateaued at a level of 7 to 8% post 2011, with industrial energy
consumption dominated by oil products and coal; the latter having grown significantly since 2009.
Figure 15: South Korea Gas Consumption in Power and Non-Power Sectors 2000-2014
60
50
Bcma
40
Power Generation
30
City Gas
20
10
0
2000
2005
2010
Source: KEEI (2015), P. 56.
South Koreas power sector is less significant relative to other gas consumption sectors (Figure 15).
Figure 16 illustrates the minor role played by gas in power generation. Gas has a 20% share in a
sector dominated by coal and nuclear.
16
Figure 16: South Korea Fuel Consumption for Power Generation 2000-2014
120,000
Thousand Tonnes Oil Equivalent
100,000
80,000
Balancing Item
Hydro
Nuclear
60,000
Coal
Oil Products
40,000
Natural Gas
20,000
2000
2005
2010
Source: KESIS
The growing role played by coal in South Koreas energy mix in the past two decades is reflected in
the countrys CO2 emissions which, although having plateaued since 2010 were, in 2014, three times
those of 1990. The governments current goal is to achieve a 37% decrease in business as usual
GHG emissions by 203026.
1.3.2 Gas Supply

South Koreas gas supply is overwhelmingly from LNG imports. Domestic production peaked at 0.6
bcm in 2010 and has since declined. After strong growth post 2010, LNG imports declined in 2014
and 2015. Qatar has grown since 2011 to become the dominant source of LNG imports, followed by
Indonesia, Malaysia, Oman and Nigeria.
1.3.3 Energy Policy and Future Gas Demand Drivers

President Park Geun-hyes government took power in February 2013. The most recent power sector
plan (June 2015) coincided with the cancellation of four new coal-fired plants (total capacity 3.74 GW)
with modest future growth in nuclear and gas envisaged. 2029 targets for power generation shares
are Nuclear 28.5%, Coal 32.2%, Gas 24.7%, Renewables 4.6%, CHP 5.8% and Oil and Pumped
Storage 4.2%27. The envisaged share for gas in 2029 is unchanged from the latest comparable figure
from the Korean Energy Economics Institute for 2013. The 2015 plan assumes a minor decrease in
coals share of 2029 power generation relative to 2013s levels with compensating increases in
renewables and nuclear. The government expects power demand to grow annually by 2.2%, the
World Nuclear Association expects this figure to be 2.8% pa to 2020 28. However, this appears to
conflict with South Koreas objective of reducing power demand in 2035 by 15% relative to current
South Korean energy plan sees two more reactors, World Nuclear News, 22nd July 2015, http://www.world-nuclearnews.org/NP-South-Korean-energy-plan-sees-two-more-reactors-2207154.html
27
UPDATE 1-S.Korea axes four coal plants, plans two new nuclear units, Reuters, June 8th 2015,
http://uk.reuters.com/article/2015/06/08/energy-southkorea-nuclear-idUKL3N0YU0AJ20150608
28
Nuclear Power in South Korea, World Nuclear Association, July 2015, http://www.world-nuclear.org/info/CountryProfiles/Countries-O-S/South-Korea/
26
17
levels (and overall energy demand by 13%), which was stated in its 2014 Energy Master Plan. 29. The
June 2015 plan was superseded in December 2015 by MOTIE30 who expressed an expectation that
demand for gas would drop to 34.65 mtpa in 2029. The use of gas in power generation would fall to
9.48 mtpa and domestic and industrial LNG consumption would rise to 25.17 mtpa 31 . 2015 LNG
import data shows a reduction to 45.5 bcm/y from 2014s level of 50 bcm/y due to higher coal
consumption and re-start of nuclear power plant temporarily shut down due to safety considerations.
Any outlook of South Korean gas demand must take account of:
The slowdown in overall energy consumption since 2010, apparently as a result of reduced
consumption in South Koreas manufactured goods export markets, and the extent to which this
situation may change in the future. This will impact power generation and industrial consumption
sectors.
Consumption trends within the domestic non-power sector, given the outlook for low or negative
population growth.
The assumed rate of power generation growth and the gas share within it. Government messages
on this have been conflicting in recent years.
An illustrative outlook is shown in Figure 17.

Figure 17: Historic and Illustrative Future South Korea Gas Consumption
60
50
Power
40
Other
Bcma
Public
Transport
30
Industry
Commercial
20
District Heating
Residential
10
0
2000
2005
2010
2015
2020
2025
2030
Source: KEEI (2015), Authors Assumptions.
29
MOTIE (2014)
MOTIE Ministry of Trade, Industry and Energy, South Korea.
31
South Koreas gas demand to drop 5 percent by 2029, LNG World News, December 28 th, 2015,
http://www.lngworldnews.com/south-koreas-gas-demand-to-drop-5-percent-by-2029/
30
18
Future annual growth assumptions for specific sectors are:

Residential, District Heating, Commercial: 0.05% p.a.; Transport: 1%; Industry: 0.5%; Power: 2.2%.
(Note that 2014 and 2015 sectoral divisions are notional in order to achieve aggregate consumption
levels).
Total demand in 2030 amounts to 52.7 bcm compared with 45.5 bcm in 2015.
Figure 18 superimposes the illustrative demand outlook on South Koreas LNG contractual supply
position.
Figure 18: South Koreas LNG Supply Outlook and Demand Uncertainty 2010 2030
60
50
40
Contestable Demand
Bcma

30
Existing Medium and & Long Term Contracts - US

Existing Medium & Long Term Contracts Non-US
Historic Medi um & Long Term Contracts
LNG Demand (Low)
20
10
0
2010
2015
2020
2025
2030
Source: GIIGNL (2014), Authors Analysis
Continued access to spot and short term contractual arrangements should suffice to ensure adequate
supply of LNG for South Korea until the early to mid-2020s, although re-sale of short-term contract
volumes was required to manage the situation in 2015 and 2016. Post 2025, South Korea will likely
seek new supply contracts to offset the sharp decline in its existing portfolio. This will provide an
opportunity to change the price formation balance of its supply away from oil indexation if so desired.
1.3.4 South Korea - Conclusions

South Korea is Asias second largest LNG importer, but with gas in 2014 representing only 15.7% of
its primary energy mix. Despite past periods of strong economic growth, the slowdown in the USA,
China and the Eurozone has required a refocus away from export industry to domestic-oriented
industry and services. Longer term challenges include an aging population, inflexible labour market
and the dominance of large conglomerates/incumbents. This is relevant to LNG which in South
Korea is dominated by KOGAS, the worlds largest corporate LNG purchaser. With negligible
19
domestic production, South Koreas gas market development is directly reflected in its LNG import
requirements.
South Koreas future LNG demand will be determined by:
The extent to which it can regenerate economic growth and the balance between energy intensive
manufacturing and domestically focussed service industries,
The need to reduce the role of coal and oil in its energy mix in order to reduce GHG emissions.
The extent to which gas plays a role in achieving this is at present uncertain.
The extent to which the government is able to achieve its future target for nuclear power
generation, given a degree of popular opposition to it. In a GHG emission-constrained world this
could increase LNG demand.
Despite the rather muted demand outlook, at least compared to historic LNG consumption growth
trends, the need for new contracted supplies in the 2020s as existing long term contracts expire,
places South Korea (and by definition KOGAS) in the front line of buyer-initiated moves away from
JCC-linked contract pricing.
Table 2 shows a high case for South Korean Imports based on the June 2015 power sector plan
discussed above, and a low case consistent with MOTIEs revised view of December 2015.
Table 2: South Korea LNG Imports Low and High Cases
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Bcm/y Low Case 44.4 48.4 50.0 55.0 51.2 45.5 44.4 44.5 44.6 44.7 44.8 44.9 45.1 45.3 45.6 45.8 46.1 46.4 46.7 47.1 47.5
High Case 44.4 48.4 50.0 55.0 51.2 45.5 44.9 45.4 45.9 46.4 46.9 47.4 48.0 48.5 49.1 49.6 50.2 50.8 51.4 52.0 52.7
mtpa
Low Case 32.7 35.6 36.8 40.4 37.6 33.4 32.7 32.7 32.8 32.8 32.9 33.0 33.2 33.3 33.5 33.7 33.9 34.1 34.4 34.6 34.9
High Case 32.7 35.6 36.8 40.4 37.6 33.4 33.0 33.4 33.7 34.1 34.5 34.9 35.3 35.7 36.1 36.5 36.9 37.4 37.8 38.3 38.7
1.4 Taiwan
Over the past 50 years the Taiwanese government and private sector have co-operated to
continuously enhance industrial competitiveness and achieve steady economic growth. Taiwan has
become the global centre for semiconductors, flat panel displays and many other high-tech products.
Exports, led by electronics, machinery and petrochemicals provided the impetus for economic
development, however this heavy export dependence exposed the economy to fluctuations in world
demand. Free trade agreements have proliferated in East Asia in recent years with the Economic
Cooperation Framework Agreement signed with China in June 2010 a notable landmark. Taiwan
since 2009 has gradually loosened rules governing Chinese investment on the island, and has also
secured greater market access for its investors in the mainland. Taiwan's diplomatic isolation, low
birth rate, and rapidly aging population are other major long-term challenges32.
Taiwans energy mix (Figure 19) is heavily dominated by oil and coal (76% combined in 2014 with gas
constituting 13.8%). After rapid growth from 1995 to 2007 (4.5%/year), energy consumption growth
has been muted following the 2008 financial crisis.
32
CIA (2015a)
20
Figure 19: Taiwan Primary Energy Consumption 1995-2014

120
Other Renewables
100
Wind
Mtoe
80
Solar
Hydro
60
Nuclear
40
Coal
Oil
20
Gas
0
1995
2000
2005
2010
Source: BP (2015)

Non-Power (or city gas) consumption is shown in Figure 20. Residential consumption has increased
by 2%/year since 2010, but more remarkably industrial and services consumption has risen by
4.8%/year in the same period.
Figure 20: City Gas Consumption by Sector 2000 2014
4.5
4.0
3.5
Bcma
3.0
Own Use
2.5
Industrial
2.0
Services
Residential
1.5
1.0
0.5
0.0
2000
2005
2010
Source: MOEA (2015), pp 69, 75
21
From Figure 21 it is apparent that Taiwans use of gas is dominated by the power generation sector,
with city gas in 2014 accounting for only 21.5%. Power sector gas consumption surged post 2009,
with annual growth from 2010 to 2014 at 5.1%/year.
Figure 21: Taiwan Gas Consumption in Power and Non-Power Sectors 2000 - 2014
20
18
16
14
Bcma
12
Power
10
City Gas
8
6
4
2
0
2000
2005
2010
Source: MOEA (2015), pp 69, 75
This trend is confirmed in Figure 22 which shows power generation by fuel/technology. The growth of
gas-fired generation post-2010 has been at the expense of oil and to a lesser degree coal. The
growth of coal in the power generation sector and in the energy mix more generally has directly
contributed to Taiwans CO2 emission profile. Although having plateaued post 2007, Taiwans 2014
CO2 emissions are 2.45 times their 1990 level33.
Figure 22: Taiwan Power Generation by Fuel or Technology Type 2000 - 2014
300,000
250,000
Waste
Biomas
200,000
Solar
GWh
Wind
Pumped Hydro
150,000
Hydro
Nuclear
Coal
100,000
Oil
Gas
50,000
0
2000
2005
2010
Source: MOEA (2015), P. 87
33
BP (2015)
22
1.4.2 Gas Supply

Taiwan currently has some 0.4 bcm/y of domestic production from nine onshore fields on the western
side of the island, and three offshore platforms on the CBK 1-3 gas fields34. The overwhelming source
of gas supply is from LNG imports.
Historically Taiwans main LNG suppliers have been Indonesia and Malaysia. By 2010 the supply
portfolio had become diversified with the addition of Qatar, Nigeria, Oman, Australia and others;
however by 2014 Qatar grew to represent 45% of LNG imports.
1.4.3 Energy Policy and Future Gas Demand Drivers

Despite Taiwans economic success, it faces challenges on the energy policy front. Its ambiguous
relationship with mainland China and consequently limited international diplomatic relationships,
together with minimal domestic energy endowment, have engendered concerns over security of
energy supply. Its goals for CO2 abatement (set in 2008) are to reduce CO2 emissions to 2008 levels
by 2020 and to 2000 levels by 2025 35. Taiwans energy policy focuses on nuclear generation security,
energy efficiency, renewables (wind and solar) deployment to reach 16.1% of generation capacity by
2030, a phase out of nuclear and the reasonable use of natural gas for security of energy supply. No
mention is made of specifically cutting coal consumption36.
Two major barriers to progress are a) the low domestic price of electricity and gas which has led to a
huge cumulative debt on the part of CPC and Taipower 37 and does not allow decarbonisation
investment costs to be passed on to consumers; and, b) the anti-nuclear public opinion, catalysed by
the Fukushima disaster, which has led to the mothballing and suspension of two reactors under
construction at the Lungmen nuclear power plant 38 . The six existing reactors are planned to be
phased out between 2018 and 2025.
The outlook for future gas demand in Taiwan critically depends on a) the future growth of power
demand and b) the relative shares of gas and coal in power generation (in the context of the intent to
phase out nuclear power) and whether policies will emerge to favour gas over coal.
For an assumed future power demand growth of 1%/year, Figure 23 shows a scenario where nuclear
is phased out as currently anticipated, wind and solar generation grow at an assumed 20%/year, oil
continues to be squeezed, gas grows at an assumed 4%/year and coal supplies the balance. Gasfired generation continues on its 2000 to 2014 trend, coal increases as nuclear plants are shut down,
but due to an assumed continued growth of renewables and gas, by 2030 coal consumption in power
is 10% lower than in 2014.
Energy Profile of Taiwan, Encyclopedia of Earth, October 2007, http://www.eoearth.org/view/article/152534/

Huang, C. & Ko, F. (2009)
36
Taiwan (2015)
37
Liao, H. & Jhou, S. (2013)
38
Political Discord Places Lungmen on hold, World Nuclear News, April 2014, http://www.world-nuclear-news.org/NN-Politicaldiscord-places-Lungmen-on-hold-2804144.html
34
35
23
Figure 23: A Possible Future Generation Outlook to 2030 for Taiwan

350,000
300,000
Waste
250,000
Biomas
Solar
200,000
GWh
Wind
Pumped Hydro
Hydro
150,000
Nuclear
Coal
100,000
Oil
Gas
50,000
0
2000
2005
2010
2015
2020
2025
2030
Source: MOEA (2015), P. 87, Authors Assumptions and Analysis.
The resulting total gas demand outlook is shown in Figure 24, with gas demand by 2030 reaching
32.1 bcm compared to a 2015 figure of 19 bcm.
Figure 24: Taiwan Gas Demand Outlook to 2030
35
30
25
Power
20
Bcma
Own Use
Industrial
15
Services
Residential
10
0
2000
2005
2010
2015
2020
2025
2030
Source: MOEA (2015), Authors Assumptions and Analysis.

24
Figure 25: Taiwan Future LNG Demand and Contractual Position

35
30
25
20
Bcma
Existing Medium and & Long Term

Contracts - US
Existing Medium & Long Term Contracts
Non-US
15
Historic Medium & Long Term Contracts
10
LNG Demand (High)
0
2010
2015
2020
2025
2030
Source: GIIGNL (2014), Authors Assumptions and Analysis
The combination of this LNG demand outlook with Taiwans contractual position is shown in Figure
25. Taiwan has a stable long term contract portfolio of some 13.1 bcma, all but 1.1 bcma (US sourced
LNG under a contract with GDF-Suez) being predominantly JCC price-linked. Taiwan, in the face of
significant uncertainty over its future energy mix, (as opposed to its policy intentions), will need to
consider entering into additional medium or long term LNG contracts towards the end of this decade if
it wishes to avoid increasing dependence on the spot LNG market to fulfil its import requirements.
1.4.4 Taiwan - Conclusions

Taiwan has developed a successful high technology-focused export led economy which has in recent
decades enjoyed high (if at times volatile) economic growth. It has based this on a high carbon
intensity energy mix in which coal and oil are dominant. While gas represented only 13.8% of primary
energy consumption in 2014 it has been growing at 5%/year on average since 2010. Taiwans gas
consumption is dominated by the power sector. Taiwans quest to reduce its CO 2 emissions and
energy import dependency are challenged by: a popular revolt against nuclear power; and, low
regulated domestic prices for gas and electricity.
Even assuming high growth rates of future wind and solar investment (20%/year) the challenge for
Taiwan is to contain coal consumption. It is feasible therefore that gas demand (and LNG imports)
could continue to follow their 2010-2014 growth trend of 4 %/year. This would add an additional
import requirement by 2030 of 14 bcm/y over 2014s level.
Table 3 shows the high case discussed above and a Low case in which power demand growth for
gas is only 1% /year.
25
Table 3: Taiwan LNG Import Outlook Low and High Cases
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Low Case 15.2 16.6 17.2 17.3 18.3 19.7 19.2 19.5 19.7 20.0 20.3 20.5 20.8 21.0 21.3 21.6 21.8 22.1 22.4 22.6 22.9
High Case 15.2 16.6 17.2 17.3 18.3 19.7 19.9 20.1 20.9 21.6 22.4 23.3 24.1 25.0 25.9 26.8 27.8 28.8 29.8 30.9 32.1
Bcm/y
mtpa
Low Case 11.2 12.2 12.7 12.7 13.5 14.5 14.1 14.3 14.5 14.7 14.9 15.1 15.3 15.5 15.7 15.9 16.1 16.2 16.4 16.6 16.8
High Case 11.2 12.2 12.7 12.7 13.5 14.5 14.3 14.8 15.4 15.9 16.5 17.1 17.7 18.4 19.0 19.7 20.4 21.2 21.9 22.7 23.6
1.5 Conclusions Mature Asian LNG Markets

Japan, South Korea and Taiwan have accounted for around 60% of world LNG demand since 1980.
Despite their differences the three countries face some common issues which will impact their future
LNG demand:
The future of nuclear power. Following the Fukushima disaster, Japans future LNG requirements
are expected to be most directly influenced by the pace and extent of the programme for
restarting nuclear power plant. South Korea has restarted nuclear plant temporarily shut down
due to safety considerations and government policy sees a continuing role for nuclear which
might in future be contested. In Taiwan, government policy sees a phase-out of nuclear plant by
2025.
Coal is the most price-competitive power generation fuel in all three countries. How the obvious
clash between this and GHG obligations made at COP21 will be resolved remains to be seen. For
now these counties are relying on (challenging) assumptions of energy efficiency and rapid
renewable capacity growth to meet such targets.
All three counties face the issue of low birth rates, aging populations and hence long term
population decline. In terms of their economic model, this emphasises the need for exportorientated activity rather than domestic consumption to provide economic growth. Taiwans
diplomatic isolation and South Koreas inflexible labour market and the dominance of large
conglomerates/incumbents are other long term challenges.
Future economic growth is a key factor affecting power and industrial demand. Japan is an
industrialised economy which has suffered low growth since the early 1990s. South Koreas
previous strong economic growth has been muted since 2010 due to economic slowdown in the
USA, Asia and the Eurozone. Whether these economies can maintain growth by stimulating
domestic demand is an open question at present. Taiwan has also relied on export markets for its
high tech products, however it remains to be seen whether its trade agreements signed in recent
years, including with China, will extend its existing business model.
Overall the LNG demand outlook for these three countries is somewhat less bullish than historic
trends might suggest.
26
2. More Recent and Emerging Asian LNG Markets

2.1 Introduction
This section covers a range of markets: from China and India where LNG, as an already established
channel of gas supply could grow to levels of major global importance; to more recently emerged and
potential new importers where future LNG requirements are uncertain, such as: Singapore, Thailand,
Indonesia, Malaysia, Pakistan, Bangladesh and Vietnam.
Each country has specific LNG import needs based on its gas demand expectations and domestic
production and pipeline gas import outlook. This section reviews each in detail with common strands
brought together in the concluding summary.
2.2 China
With a population of 1.37 billion 39 and the worlds second largest economy in 2014, China has
experienced exceptional economic growth since 1995: an annual average of 9.6%. In 2015 attention
focussed on the slowdown in Chinas economic growth which officially was around 7% year on year in
terms of GDP, but in terms of observed commodities imports and manufacturing output may have
been lower. Figure 26 shows Chinas primary energy mix from 1995 to 2014, demonstrating that its
economic growth, in energy terms, has been driven overwhelmingly by coal.
Figure 26: Primary Energy Mix of China 1995 to 2014
3,500
Other Renewables
3,000
Wind
2,500
Solar
Hydro
1,500
Nuclear
Mtoe
2,000
Coal
1,000
Oil
500
Gas
0
1995
2000
2005
2010
Source: BP (2015)
In 2014 the gas share of the energy mix stood at 5.6% compared with coal (65.7%), oil (17.9%) and
hydro (8%). Despite its minor contribution, gas consumption grew at 13.2%/year on average from
2010 to 2014 (compared with total energy consumption growth of 4.7%). Energy consumption growth
39
Countrymeters: Website of key country statistics:http://countrymeters.info/en/China
27
slowed in 2014 however to only a 2.5% increase over 2013 (gas 8.4%). Of particular note is that coal
consumption in 2014 was virtually unchanged at the 2013 level40.

Figure 27 shows the sectoral annual gas consumption (China (2014)) compared with the BP
Statistical Review total figure. Residential and commercial demand has increased by 2 % on an
annual average basis between 2005 and 2012; Manufacturing by 13.3% and power by 42.5%. Figure
28 shows a breakdown of manufacturing gas demand by industry segment. The main growth areas
for gas demand are Chemicals, Fuel Processing, Metal and Metal Products and Machinery and
Transport Products. Although these sectors saw a dip in demand during the post-crisis year of 2009,
by 2011 strong growth has been subsequently re-established. In all these sectors however, gas plays
second or third fiddle to coal and oil.
Figure 27: China Gas Consumption by Sector 2000 - 2014
200
180
160
Bcma
140
120
100
80
60
40
20
0
2000
2005
2010
Residential
Commercial
Manufacturing
Mining
Transport
Other
Power
Total (BP Stats)
Sources: China (2014) (and previous editions), BP Statistical Review of World Energy.
Note that other sources suggest that 2014 saw coal consumption decline by 2.9% from the 2013 level. Official data
confirms Chinese coal use fell in 2014, Carbon Brief, 26th February 2015, http://www.carbonbrief.org/official-data-confirmschinese-coal-use-fell-in-2014
40
28
Figure 28: China Gas Consumption by Industry Segment 2000-2012

70
60
Bcma
50
40
30
20
10
0
2000
2005
2010
Food, Timber, Paper etc
Fuel Processing
Chemicals
Metal & Metal Products
Machinery & Transport Products
Computers and Specialist Engineering
Other
Source: China (2014) (and previous editions)
In the power sector gas continues to play a very minor role compared to coal and hydro (Figure 29).
In 2012 gas provided only some 2% of power generation compared with coal (76%) and hydro (18%);
this despite gas-fired generation growing by an estimated 24%/year on average between 2009 and
2012.
Figure 29: China Power Generation by Fuel/Technology 2000-2012
5,000,000.00
4,500,000.00
4,000,000.00
3,500,000.00
Wind
3,000,000.00
GWh
Hydro
Nuclear
2,500,000.00
Coal
2,000,000.00
Oil
Gas
1,500,000.00
1,000,000.00
500,000.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: China (2014) (and previous editions), Authors Calculations
29
Monthly data for Chinas gas consumption is not available in a comprehensive form. While Kong,
Dong and Xhou noticed limited seasonality on the basis of import patterns to end 2012 41, the need for
gas storage facilities in addition to the mid 2015 total of 7.3 bcm appears to be growing to deal with
peak demand periods42.
2.2.2 Historical Chinese Natural Gas Supply and Demand

Figure 30 shows Chinas gas supply and demand balance for the period 2000 to 2014. From 2006
onwards demand outstripped growing domestic production with the balance initially supplied by LNG
imports. Pipeline imports from Turkmenistan and Central Asia commenced in 2010 and from
Myanmar in 2014. Domestic production is overwhelmingly from conventional sources with coal bed
methane and shale gas contributing only 3.6 and 1.3 bcm in 2014 respectively 43 . The revised
(downward) target for shale gas in 2020 is 30 bcm/y 44 . China has commenced a programme of
producing natural gas from coal (synthetic natural gas). While this may alleviate the particulate
pollution deriving from coal combustion in power generation and other uses, the process (without
CCS) produces higher net CO2 emissions and is a heavy consumer of water. The original intention
was to produce 50 bcm/y of synthetic natural gas by 2020, however it is likely that this will be scaled
back to 15 bcm/y45.
Figure 30: China Natural Gas Supply and Demand 2000-2014
250
200
LNG
150
Bcma
Pipeline Myanmar
Pipeline Kazakhstan & Central Asia
Pipeline Turkmenistan
100
Production
Demand
50
0
2000
2005
2010
Sources: BP (2015), GIIGNL

Note: Errors in 2010s due to different data sources.
The sources of Chinas LNG imports between 2006 and 2014 were initially dominated by Malaysia,
Indonesia and Australian, but Qatar became the largest supplier from 2012.
41
Kong, Z, Dong X & Zhou, Z (2015)

China Natural Gas Map, http://www.chinagasmap.com/theprojects/gasstorage.htm
43
Chinas unconventional output up, Platts International Gas Report, Issue 766, January 26, 2015.
44
Yin and Yang of Chinese shale gas, Audrey Raj, Asian Oil & Gas, 27th May 2015,
http://www.aogdigital.com/component/k2/item/4912-yin-and-yang-of-chinese-shale-gas
45
In China, a tug of war over coal gas: Cleaner air but worse for the climate, Simon Denyer, Washington Post, 5th May 2015,
https://www.washingtonpost.com/world/in-china-a-tug-of-war-over-coal-gas--cleaner-air-worse-for-theclimate/2015/04/27/b10992cc-e380-11e4-ae0f-f8c46aa8c3a4_story.html
42
30
In 2015 three of Chinas largest gas producers limited gas production in the face of demand slowdown
but China still had to resell some long-term contracted LNG volumes.
2.2.3 Chinese Energy Policy

In June 2014, President Xi Jinping called for an energy policy shift based on five key areas:
consumption, energy mix, technology, the energy system, and international co-operation. The
government aims to cut annual coal consumption by 160 million tons by 2020. China intends to
increase the share of gas in its energy mix to 10% in addition to achieving 100 GW of wind capacity
by 2015 and further growth of solar PV from 21GW in 2015 46. Chinas energy policy gained greater
international prominence through the joint announcement of national climate targets by President
Barack Obama and President Xi Jinping in November 2014, ahead of the December 2015 Climate
Summit. China intends that its CO2 emissions will peak around 2030 and will use best efforts to bring
that date forward47.
From 2011 Chinese policy makers have undertaken a reform of Chinese natural gas pricing in the
domestic market, progressively linking city gate prices to a formula including competing fuels, notably
fuel oil and LPG, albeit with delayed re-calculation48. This was an attempt to rationalise the internal
pricing system in terms of gas price competitiveness with competing fuels; and to ensure an economic
logic to the matrix of well head cost of supply, contractual price formulae and transport costs for
Chinese supply sources (imports and domestic production). This has run into headwinds. Domestic
prices under the Chinese competing fuel price formula have risen above those in international (LNG
spot) markets leading to an oversupply in the domestic market. With oil and oil product prices low
since the oil price slump of late 2014, gas faces challenges in achieving government energy mix
targets in China unless prices are further liberalised. Wood Mackenzie estimate that China faces an
oversupply of 18 bcm/y of contracted gas between 2015 and 2017 due to lower than expected
demand growth.49 It has been suggested that the government take advantage of the oversupply to
push natural gas market reform and boost its share in transportation fuels 50.
2.2.4 Future Chinese Natural Gas Demand

In early 2014 the Chinese National Development and Reform Commission indicated that by 2020 it
would raise its total natural gas supply capacity to between 400 bcm/y to 420 bcm/y 51. As Chinas
economy began to slow during 2014 CNPC in December 2015 provided a more modest demand
outlook of 300 bcm/y by 2020 on a Business as Usual Scenario 52. The IEA in its 2015 World Energy
Outlook showed a gas demand figure for China of 315 bcm/y for 2020 in the New Policies
Scenario53. These demand outlooks to 2030 are shown in Figure 31. Due to a combination of high
regulated gas prices and a slowdown in economic activity, Chinas gas consumption for 2015
appeared (in October) to be only 2.6% higher than 2014 54. This serves to cast doubt on some of the
more aggressive demand trends in Figure 31. For the purpose of this analysis, Figure 31 includes a
High Demand Case Assumption (dashed red line) which converges on the IEA New Policies case by
2020; and a Low Demand Case Assumption (dashed blue line) which by 2020 and beyond is the
46
Ma, D (2015)
China Energy Outlook 2015, Alexandra Cheung, Imperial College London, April 1st 2015,
http://wwwf.imperial.ac.uk/blog/climate-at-imperial/2015/04/01/china-energy-outlook-2015/
48
For a comprehensive description see Chen, M (2014)
49
High prices threaten Beijings target of natural gas accounting for 10pc of energy use, Eric Ng, South China Morning Post,
21st June 2015, http://www.scmp.com/business/china-business/article/1824591/high-prices-threaten-beijings-target-natural-gasaccounting
50
Reforms urged as natural gas glut falls on China, Want China Times, 11th August 2015,
http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20150811000029&cid=1202 [I couldnt get through to this ref]
51
China to raise natural gas supply to 400-420 billion cubic metres by 2020: NDRC, The Economic Times, April 24th 2014,
http://articles.economictimes.indiatimes.com/2014-04-24/news/49378338_1_ndrc-natural-gas-supply-national-bureau
52
CNPC (2015)
53
IEA (2015a), P 196
54
Chinas weak natural gas demand cuts into LNG imports, ICIS, 7th October 2015,
http://www.icis.com/resources/news/2015/10/07/9930658/china-s-weak-natural-gas-demand-cuts-into-lng-imports/
47
31
average of the CNPC 2015 Business as Usual and Low cases. It is to be stressed that these two
cases are illustrative and not based on quantitative analysis. CNPC (2015) however, presents a
useful benchmark for the scope for potential coal to gas switching, driven by government policy with
the aim of reducing CO2 and particulate emissions: 40 bcm/y in power generation, 55 bcm/y in
industry and 20 bcm/y in space heating. The proposed timescale for achieving this total 110 bcm/y of
coal to gas substitution is 5 years55.
Figure 31: China Historical and Future Natural Gas Demand from Various Sources
600
500
400
Historical (BP Stats)

NDRC 2020 Supply High
Bcma
NDRC 2020 Supply Low

CNPC 2015 High
300
CNPC 2015 Business as Usual

CNPC 2015 Low
IEA New Policies Scenario 2015
High Demand Assumption
200
Low Demand Assumption
100
0
2000
2005
2010
2015
2020
2025
2030
24th
Sources: BP (2015), The Economic Times, April

2014, http://articles.economictimes.indiatimes.com/2014-0424/news/49378338_1_ndrc-natural-gas-supply-national-bureau, CNPC (2015), P 196.
2.2.5 Chinas Future Natural Gas Supply Mix

It is fair to say, in early 2016, that all elements of Chinese natural gas supply are prone to
considerable future uncertainty. In the face of weak demand for natural gas in 2015 Chinese
upstream companies were reported to be reducing conventional gas output while striving to meet
targets for shale gas production56.
Chinese domestic supply includes conventional gas, shale gas, coal bed methane and synthetic gas
(gas from coal). There are few sources which provide a comprehensive outlook for each. The IEA in
its 2015 World Energy Outlook (New Policies Scenario) provides a total Chinese domestic gas
production total. CNPC 57 provide a useful breakdown based on analysis presented in November
2014. The outlook from both sources is shown in Figure 32.
CNPC (2015), Slide 19.

China curbs conventional gas output, keeps shale target, Reuters, September 19th, 2015,
http://www.reuters.com/article/china-gas-idUSL3N10N44X20150910
57
CNPC (2014)
55
56
32
Figure 32: Historical and Future China Domestic Natural Gas Production
300
250
200
CNPC Synthetic Natural Gas
Bcma
CNPC Coal Bed Methane

CNPC Shale Gas
150
CNPC Conventional Gas

Historical (BP Stats)
IEA New Policies Scenario 2015
Assumed Total Domestic Production
100
50
0
2000
2005
2010
2015
2020
2025
2030
Sources: BP (2015), IEA (2015a), CNPC (2014).
Clearly CNPC sees greater potential for domestic production, with anticipated growth from shale gas,
coal bed methane and synthetic natural gas (gas from coal) than is implied in the IEA New Policies
Outlook. The analysis in the remainder of this section will be based on the assumption that Chinese
domestic production follows the dashed red line in Figure 32, which tracks the IEAs 2015 New
Policies Scenario assumption between 2015 and 2020 but continues on a linear trend (i.e. it diverges
from the IEA case), which assumes an acceleration in domestic production in the 2020s. The author
is inclined to take this conservative view given the lack of positive news on the progress of
unconventional gas development in China.
To varying degrees CNPC has invested both in upstream field development and pipeline
infrastructure to bring Turkmenistan, Kazakhstan and Uzbekistan gas, entering at Chinas north-west
border, to key demand centres. In 2014 total imports via this route amounted to 28.3 bcm, although
existing and future pipeline capacity could raise this to 65 bcm/y. In 2014 China imported 3 bcm/y
from Myanmar with the potential to raise this to 10 to 12 bcm/y in the future 58. Chinas two pending
pipeline import deals with Russia were prominent in the media in 2014 and 2015; namely a 38 bcm/y
contract to supply gas from East Siberian fields (the Power of Siberia project) entering China at its
north-east border; and a 30 bcm/y contract to supply West Siberian gas at Chinas north-west border,
the Altai Pipeline. These supplies were expected to come onstream around 2020. However, in mid2015, media reports cast doubt on whether these arrangements would progress. The border price
required by Gazprom in 2015 appeared high in comparison with contract and spot LNG import prices,
and weakening Chinese demand growth has eased the pressure on China to fully consummate these
two contracts.
Natural Gas Imports into China Prospects for Growth, King & Spalding Energy Newsletter, September 2014,
http://www.kslaw.com/library/newsletters/EnergyNewsletter/2014/September/article1.html
58
33
Taking the Low Case view of Chinese gas demand shown in Figure 31, a possible disposition of
Chinese supply is shown in Figure 33, from conventional and unconventional sources and based on
assumptions on future pipeline import levels.
Figure 33: China Supply and Demand 2000 to 2030, Low Case
600
500
400
LNG Imports
Bcm/y
Pipeline Imports - West Siberia

Pipeline Imports - East Siberia
300
Pipeline Imports - Turkmensitan & Central Asia

Pipeline Imports - Myanmar
Domestic Production
200
Demand
100
0
2000
2005
2010
2015
2020
2025
2030
Source: BP (2015), IEA (2015a), GIIGNL (2014), Authors Assumptions
In Figure 33, Myanmar pipeline imports are assumed to grow by 1 bcm/year to reach 11 bcm/y by
2022, Turkmenistan and Central Asian imports grow from 2015 to reach 60 bcm/y by 2022 and the
Russian East Siberian project is assumed to proceed with imports commencing in 2023 and growing
to 38 bcm/y by 2026. LNG is assumed to make up the balance, reaching some 56 bcm/y in the early
2020s and 75 bcm/y by 2030. Table 4 summarises the balance at 5 yearly intervals.
Table 4: China Supply and Demand on Base Case Demand Assumptions bcm/y
Demand
Domestic Production
Pipeline Imports - Turkmenistan & Central Asia
LNG Imports
Total Supply
2015
192
133
4
28
0
0
27
192
2020
285
172
9
50
0
0
54
285
2025
350
203
11
60
30
0
46
350
2030
418
234
11
60
38
0
75
418
Source: BP (2015), IEA (2015a), GIGNL (2014), Authors Assumptions
A high demand case could yield the balance shown in Figure 34. Here, Turkmenistan and Central
Asian imports grow to 65 bcm/y by 2022. The Russian East Siberian project is assumed to commence
in 2021 and grow to 38 bcm/y by 2024, and the West Siberian project (Altai line) is assumed to start in
2024 reaching 30 bcm/y by 2026. LNG is assumed to make up the balance reaching some 105 bcm/y
by 2030. Table 5 summarises the balance at 5 yearly intervals
34
Figure 34: China Supply and Demand 2000 to 2030, High Demand Assumption
600
500
400
LNG Imports
Bcm/y

300
Pipeline Imports - Turkmensitan & Central Asia

Domestic Production
200
Demand
100
0
2000
2005
2010
2015
2020
2025
2030
Source: BP (2015), IEA (2015a), GIIGNL (2014), Authors Assumptions
Table 5: China Supply and Demand on High Case Demand Assumptions bcm/y
Demand
Domestic Production
Pipeline Imports - Turkmenistan & Central Asia
LNG Imports
Total Supply
2015
192
133
4
28
0
0
27
192
2020
315
172
9
55
0
0
79
315
2025
403
203
11
65
38
20
66
403
2030
483
234
11
65
38
30
105
483
Source: BP (2015), IEA (2015a), GIGNL (2014), Authors Assumptions
Figure 35 shows the future LNG import requirements on these two demand cases and compares
them with Chinas current portfolio of future long term contracts. Historic data on Chinas LNG
imports; long term and short term contract deliveries and spot/short term transactions is also shown.
Note Platts data shows 2015 Chinese LNG imports amounted to 26 bcm/y, little changed on 2015
levels.
35
Figure 35: Chinas LNG Import Requirements on Base and High Future Demand Cases and
Contractual Commitments
120
100
80
Spot Transactions
Bcm/y
Short Term Contracts

Existing M & LT Contracts - JCC
60
Historic M & LT Contract Imports
High Demand
Low Demand
40
20
0
2010
2015
2020
2025
2030
Sources: GIIGNL (2014), Authors Calculations
In 2015 and 2016, China had more contracted LNG than it could absorb. In the Low demand case
defined above, China would continue to be over-contracted to varying degrees until the mid-2020s.
Postponement of the second Russian pipeline project and/or reducing take-up of
Turkmenistan/Central Asian volumes would mitigate this position. Failing this, China would be
required to sell-on contracted LNG volumes (as it did in 2015) potentially incurring a loss relative to
contract price.
2.2.6 China Conclusions

Over the past 10 years or so, China has been the source of increasing demand for a range of
imported commodities including oil and natural gas. Chinas situation has changed however as, from
2014, it appeared to enter a phase of lower growth, re-focussing away from energy intensive statedirected infrastructure and manufacturing activity towards domestic consumption and services. Any
move to a lower carbon-intensive economy on the part of China needs to address its overwhelming
reliance on coal. Growth in nuclear, hydro, wind and solar PV will help in this regard, but the
timescales required to achieve targets through such investment programmes are often
underestimated. Gas has an obvious role to play, however China is rightly concerned to ensure: that it
maximises its domestic production capabilities; prices for contracted imported supplies are acceptable
and such arrangements do not hinder the move to market-related pricing in the future. The challenge
for China is to manage all of the above in the context of uncertain future energy requirement and fuel
mix.
Table 6 summarises Chinas LNG import requirements for the cases discussed above.
36
Table 6: China LNG Import Cases
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Low Case 13.1 17.8 19.9 25.3 25.8 27.2 27.0 32.5 38.0 43.5 54.0 54.8 55.6 52.4 49.2 46.0 45.4 52.8 60.2 67.6 75.0
High Case 13.1 17.8 19.9 25.3 25.8 27.2 26.8 45.6 61.4 66.2 79.0 74.4 69.8 71.2 64.6 66.0 65.8 75.6 85.4 95.2 105.0
Bcm/y
mtpa
Low Case
High Case
9.6 13.1 14.7 18.6 19.0 20.0 19.9 23.9 27.9 32.0 39.7 40.3 40.9 38.5 36.2 33.8 33.4 38.8 44.3 49.7 55.1
9.6 13.1 14.7 18.6 19.0 20.0 19.7 33.5 45.1 48.7 58.1 54.7 51.3 52.4 47.5 48.5 48.4 55.6 62.8 70.0 77.2
2.3 India
2.3.1 Energy Mix and Gas Supply and Demand
With a population of 1.2 billion Indias GDP growth has exceeded the world average in every year
since 2001. Indias economy, in 2014, in terms of GDP comprises Agriculture (18%), Industry (31%)
and Services (51%)59, thus being more highly dependent on agriculture than other major Asian LNG
importers. After low economic growth in 2013, the incoming Prime Minister Narendra Modi has
promised to implement economic reform to attract private-sector investment. Indias economy
continues to operate far below its potential with corruption, poor infrastructure, and fiscal deficits all
major obstacles to economic growth. 60
Figure 36: Primary Energy Mix of India 1995 to 2014
700
Renewables
600
Wind
Mtoe
500
Solar
400
Hydro
300
Nuclear
200
Coal
100
Oil
Gas
1995
2000
2005
2010
Source: BP Statistical Review of World Energy
Indias Primary energy consumption trends are shown in Figure 36. The energy mix is dominated by
coal (56.5% in 2014) and oil (28.3% in 2014) with gas a poor third at 7.1%. The decline in gas use
since 2011 is a consequence of a reduction in domestic production (see later). Total energy
consumption has grown by 5.8%/year on average between 2010 and 2014, while coal consumption in
the same period grew by 8.5%/year. Comprehensive sectoral consumption for LNG imports is not
Sector-wise contribution of GDP of India, Statistics Times, 8th July 2015, http://statisticstimes.com/economy/sectorwise-gdpcontribution-of-india.php
60
India, 2015 Index of Economic Freedom, The Heritage Foundation, http://www.heritage.org/index/country/india
59
37
forthcoming. Figure 37 provides an estimated breakdown of natural gas including LNG consumption
and compares this with total annual demand (calendar years).
Figure 37: Estimated India Natural Gas Consumption by Sector 2004/05 to 2013/14
70
60
50
Power Generation
Others - Non Energy Use
Bcma
40
Others - Energy Use

Captive use/LPG Shrinkage
Tea Plantation
30
Petro-Chemicals
Fertilisers
20
Industrial Fuel
Domestic Fuel
10
Demand (calendar years)
Sources: BP (2015), India (2013a), P. 28, Corbeau, A. (2010), P. 38, India (2013b), P.14
Note: Detailed consumption breakdown by sector is only reported annually (fiscal years) for domestic gas
production. LNG consumption by sector was prorated based on data for 2012/13 only. Total demand was from
the BP Statistical Review (calendar years).
The key dynamic in this figure is the decline in overall demand post 2011; the result of abruptly falling
domestic production which was not compensated for by an increase in LNG imports. Figure 37 shows
a fairly stable level of industrial consumption, a higher consumption in domestic fuel post 2009/10 but
with limited growth thereafter, a generally growing consumption in fertiliser production to 2009/10
(again stagnant in recent years) and a power sector demand which grew rapidly to 2010/11 but which
has reduced after this peak.
For a description of the Indian domestic gas market, the reader is directed to Sen, A (2015) 61. The
following summarises key points from this paper.
Gas consumption in India is governed by the Gas Utilisation Policy which supports the rationing of
domestically produced gas to Tier 1 priority sectors with the resulting balance released for sale to the
wider Indian market. The major priority sector customers are City Gas for households and
transportation, fertilizers, LPG extraction plants and grid-connected power plants. Industrial users
including steel, refineries and petrochemical plant, commercial users and merchant power plants are
regarded as Tier 2, or lower priority users in this allocation system.
61
Sen, A (2015)
38
Prices received by producers of domestic gas are determined by state regulation and vary depending
on the original licencing terms. The majority of domestic gas prior to the price reform implemented in
April 2015, received $4.20/MMBtu. While observers expected the price reform to result in a near
doubling of this price, in the event by selecting a basket dominated by relatively low international
reference prices (US Henry Hub, Canadian hub prices, and Russian domestic price as prime
examples), the post reform price rose modestly to $4.66/MMBtu.
LNG is imported at prices determined by contractual terms (historically an oil price linkage) or spot
prices. Some LNG may be directed to Tier 1 consumers (with the state or state-owned entities funding
any subsidies involved). Tier 2 consumers will pay the import price of LNG consumed, plus any
additional transportation and other costs.
India consumes some 30 million tonnes/year of fertiliser, second only to China. Of the urea
manufactured in India 81% derives from gas feedstock. Farmers receive a subsidy amounting to 50%
of the cost of urea. While a growing population and economic wealth will support increased underlying
demand for fertilizer, the ability of farmers to pay the real price of urea (or the governments ability to
fund the current subsidy arrangement) may act to dampen its availability.
In the power sector gas-fired generation accounts for just under 10% of total installed capacity. Power
demand is limited by the geographical extent and capacity of distribution grids. Gas fired power
suffers due to its higher cost relative to domestic or imported coal.
City gas consumption shows continued growth potential both in terms of domestic and commercial
consumption and in transportation. Again actual demand growth may be supressed by infrastructure
constraints and by supply availability. This sector is generally able to pay prices based on LNG
imports. The outlook for industrial demand is less clear.
Figure 38 shows Indian natural gas production from 2004/05 to 2013/14. Onshore production has
been stable at around 8.5 bcm/y during this period. Offshore production rose dramatically in 2008/09
and 2009/10 with the development of the KG-D6 eastern offshore gas field. Production from this field
has declined, apparently due to poor well performance and higher than anticipated water influx from
the reservoir62.
Figure 38: India Domestic Gas Production 2004/05 to 2013/14
60
50
Bcma
40
30
Offshore
Onshore
20
Production (calendar years)
10
Sources: BP (2015), India (2015)
RIL, BP offer $5 billion to hike KG D6 gas output, 1st May 2013, Oil and Gas Journal,
http://www.ogj.com/articles/print/volume-111/issue-4/exploration---development/ril-bp-offer-5-billion-to-hike.html
62
39
In Sen, A. (2015), the outlook for increased domestic production is not an optimistic one. Significant
additional resource potential could be accessed by exploration and development, but only at
wholesale or beach prices above $8/MMBtu. As policymakers seem unwilling or unable to either set
the regulated price at a level which would incentivise further domestic supply development, or allow
wholesale price to be determined by the forces of supply and demand, any future growth in Indian gas
demand will need to be met by LNG imports. The IEA in its World Energy Outlook 2015 New Policies
Scenario anticipates Indian production reaching 55 bcm/y by 2030, presumably assuming a change in
pricing policy prior to the 2020s (Figure 39). On the demand side, Figure 39 shows two rather
optimistic outlooks (Vision 2030 cases) which were derived with the intention of making a case for
policy reform to stimulate the domestic gas industry. The IEA 2015 New Policies Scenario case, by
contrast, shows a more measured growth to 2020 followed by an acceleration to reach 121 bcm/y by
2030. The IEA Current Policies Scenario by 2030 is little changed from the New Policies case (4%
lower); the 450 Scenario however has modestly higher gas demand growth in the 2020s (achieving
134 bcm/y by 2030).
Figure 39: India Demand Outlooks and Domestic Gas Production 2005 to 2030
300
250
Production Future (IEA WEO 2015

New Policies Scenario)
200
Bcma
Production (Historical)
Demand (Historical, BP Stats)
150
Demand Future (IEA WEO 2015,
New Policies Scenario)
Demand Future (Vision 2030 realistic)
100
Demand Future (Vision 2030 unconstrained)

50
0
2005
2010
2015
2020
2025
2030
Sources: IEA (2015a), India (2013b), BP (2015).
India began LNG Imports in 2004. To end 2014, Qatar has supplied 80% of Indias LNG with Nigeria
and, prior to 2014, Egypt as the main secondary suppliers. In December 2015, Indias Petronet
negotiated a 50% reduction in price under a contract signed in 1999 and was not required to pay for
volumes not imported in 2015 under the Take or Pay clause. While Indias potential future market size
40
was certainly an issue to consider, the wisdom of signing the initial deal on what is alleged to have
been a fixed price of $12 to $13/MMBtu is certainly questionable 63.
2.3.2 Indias Energy Policy and Future Gas Demand Outlook

Indias energy policy continues to appear somewhat unfocussed, notably the expedient handling of
the issue of gas price reform and the wishful thinking support of solar and wind versus the
realistically achievable scale of such capacity build. There appears to be an acceptance that coal will
provide for the main growth for power generation and no specific policy for natural gas. Future gas
growth will be hindered by a number of factors. On the supply side domestic production will not
materially increase until wholesale/beach prices are either liberalised or at the least linked to a
credible international index. Additional supply will be in the form of LNG imports, with the low
probability of completing pipeline import projects due to demand uncertainties, linking infrastructure
build requirements and pricing issues. The process of gas allocation in the domestic market and
attendant subsidies is a further barrier to establishing a market price based on supply demand,
especially with no obvious plan to extend pipeline infrastructure.
Estimating future demand trends for natural gas in India is therefore problematic at this juncture. In
the absence of any rational alternative scenario, the LNG import requirement derived from the IEA
WEO 2015 New Policies Scenario is used as a default base case, albeit that its assumptions
regarding future domestic production growth appear optimistic.
Figure 40: India Future LNG Import Requirements and Contractual Commitments
70
60
50
Spot Transactions
40
Bcm/y
Short Term Contracts

Existing M & LT Contracts - US
Existing M & LT Contracts - JCC
30
Historic M & LT Contract Imports

LNG Demand
20
10
0
2010
2015
2020
2025
2030
Source: IEA (2015a), GIIGNL (2014), Authors Analysis
Figure 40 overlays the IEA WEO 2015 LNG import requirement on Indias past LNG imports and
future contractual positions. With continued purchase of spot and short term LNG and its commitment
to purchase US LNG export volumes, Indias LNG import needs are covered on this outlook until the
early 2020s.
Petronet strikes deal with Qatars RasGas to get LNG at half-price, The Hindu Business Line, 31st December 2015,
http://www.thehindubusinessline.com/news/qatar-agrees-to-lower-price-in-gas-deal-with-india/article8049876.ece
63
41
Table 7 shows Indias tentative LNG import requirements. The outlook described above is labelled the
low case and a notional future additional growth of 20% constitutes the high case. In the context of
the uncertainty surrounding Indias future energy mix, this upside could occur in response to rising air
quality problems due to the reliance on coal and domestically burned biomass, or alternatively as a
consequence of domestic production growth failing to emerge.
Table 7: India LNG Import Requirements
Bcm/y
mtpa
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Low Case 12.2 16.8 18.1 17.8 19.8 19.9 22.6 24.5 26.3 28.2 30.0 34.0 38.0 42.0 46.0 50.0 53.2 56.4 59.6 62.8 66.0
High Case 12.2 16.8 18.1 17.8 19.8 19.9 27.2 29.4 31.6 33.8 36.0 40.8 45.6 50.4 55.2 60.0 63.8 67.7 71.5 75.4 79.2
Low Case 9.0 12.3 13.3 13.1 14.5 14.6 16.6 18.0 19.3 20.7 22.1 25.0 27.9 30.9 33.8 36.8 39.1 41.5 43.8 46.2 48.5
High Case 9.0 12.3 13.3 13.1 14.5 14.6 20.0 21.6 23.2 24.8 26.5 30.0 33.5 37.1 40.6 44.1 46.9 49.8 52.6 55.4 58.2
India has four existing LNG terminals with an aggregate capacity of 20.7 mtpa 64 (28.2 bcm/y). While
prospective terminals are planned, the need to secure demand centres and access infrastructure for
future projects will likely constrain both low and high cases from the mid to late 2010s unless these
projects proceed in a timely manner.
2.4 Singapore
Singapore has a developed a successful free-market economy relying heavily on exports, in
consumer electronics, information technology products, pharmaceuticals, and a growing financial
services sector. It has experienced comparatively high rates of GDP growth; in the period 2004 to
2007 these were in the range 7.5% to 9.5%/year 65. Singapores energy mix comprises oil products
(87% in 2014), Natural Gas 12.8% and renewables 0.2%. The average annual increase in primary
energy consumption between 2010 and 2014 was 2.4 %66.
2.4.1 Gas Consumption and Supply

In 2014 Singapore consumed 10.7bcm 67 of natural gas, overwhelmingly in the power generation
sector (Figure 41), with industry a distant second. The rapid growth in gas demand for power has
been mainly driven by displacing oil products; in 2010 gas accounted for 80.6% of the generation fuel
mix, by 2014 it was 95.4% 68 . Annual electricity demand growth in Singapore has been 2.1% on
average between 2010 and 201369.
64
GIIGNL (2014), P. 29.

World Bank (2015)
66
BP (2015)
67
The comparable figure in the BP Statistical Review of World Energy, 2015 is 10.8 bcm/y.
68
EMA (2015a)
69
EMA (2015b)
65
42
Figure 41: Singapore Gas Consumption 2009 - 2014

12
10
Power Generation
Other
6
Bcma
Transport
Industry
Commercial
Residential
Statistical Differences
0
2009
2010
2011
2012
2013
2014
-2
Source: EMA (2015b)
Having no domestic production, Singapore imports gas by pipeline from Malaysia (from 1992) and
Indonesia (from 2001) and, since 2013, LNG from a number of suppliers (Figure 42). Indonesian
pipeline volumes were reduced in favour of LNG in 2014 and Singapore has a policy of discouraging
new pipeline supply as it pursues its goal of becoming a regional LNG trading centre. The Indonesian
pipeline contracts are expected to end between 2015 and 2025 70. It is assumed that the Malaysian
pipeline contracts also end in 2025.
Singapore LNG Policy wont affect RI exports: BPMigas, The Jakarta Post, March 6th 2012,
http://www.thejakartapost.com/news/2012/03/06/singapore-lng-policy-won-t-affect-ri-exports-bpmigas.html [I couldnt get to this
ref]
70
43
Figure 42: Singapore Sources of Gas Supply 2000 - 2014

12
10
Other - LNG
8
Bcma
Indonesia - LNG
Qatar - LNG
6
Trinidad & Tobago - LNG

Equatorial Guinea - LNG
Malaysia - Pipeline
Indonesia - Pipeline
0
2000
2005
2010
Sources: BP (2015), GIIGNL (2014)
2.4.2 Singapore Outlook

The outlook for Singapore LNG requirements is shown in Figure 43. On the demand side a future 2%
annual growth in gas consumption in the power and industrial sectors is assumed and 1% in other
sectors. With the fall off in pipeline imports discussed above, this results in an LNG requirement in
2020 and 2025 of 6.6 and 10.7 bcm/y respectively.
Figure 43: Outlook for Singapore Gas Demand and Supply
16
14
12
10
Bcm/y
LNG
Malaysia - Pipeline
Indonesia - Pipeline
Demand
0
2009
2014
2019
2024
2029
Source: BP (2015), EMA (2015b), GIIGNL (2014), Authors Assumptions
44
Singapore has an LNG contract with BG for 3.8 bcm/y, in force from 2013 to 2033 71. In addition to
existing arrangements, the Singapore Energy Market Authority is pursuing a second tender to attract
LNG importers whose role would be to act as importers and re-sellers to both Singapore domestic
buyers but also to LNG bunker fuel consumers and buyers from other importing markets72.
Table 8 shows the outlook for LNG imports (low case) based on Figure 43. A high case was
constructed based on gas in power and industry growing by 2%/year and 1% in other sectors.
Table 8: Singapore LNG Import Outlook
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Bcm/y Low Case
1.2 2.3 2.8 3.9 4.6 5.2 5.9 6.6 8.0 8.6 9.3 10.0 10.7 13.0 13.2 13.4 13.6 13.8
High Case
1.2 2.3 2.8 4.0 4.7 5.5 6.2 6.9 8.4 9.1 9.9 10.6 11.4 13.8 14.0 14.3 14.6 14.9
mtpa
Low Case
High Case
0.9
0.9
1.7
1.7
2.1
2.1
2.9
2.9
3.4
3.5
3.8
4.0
4.3
4.6
4.8
5.1
5.8
6.2
6.3
6.7
6.8
7.3
7.4
7.8
7.9 9.5 9.7 9.8 10.0 10.1

8.4 10.1 10.3 10.5 10.7 10.9
2.5 Thailand
Since 2000 Thailands annual GDP growth has averaged 3.9% 73 , although somewhat volatile.
Notwithstanding political uncertainty since the 1970s, Thailand has moved from a low to an upperincome country in less than a generation. The global economic recession cut exports, and in late
2011 Thailand's recovery was interrupted by severe flooding in the industrial areas of Bangkok and
surrounding provinces. In 2013, agriculture comprised 12.1% of GDP with industry 43.6% and
services 44.2%.74 A military coup in May 2014 has come under criticism by the international business
community for micro-management and lacking an economic strategy75. No timetable is in place at the
time of writing for the election of a new government and the prospect of economic stagnation must be
considered in the absence of positive political and economic management developments.
71
GIIGNL (2014), P. 10
Appointment of New Liquefied Natural Gas Importers for Singapore, 29th May 2015, EMA,
https://www.ema.gov.sg/cmsmedia/Gas/Post-3%20Mtpa%20RFP%20Document%20Stage%20Two%2029May2015.pdf
73
World Bank (2015)
74
CIA (2015b)
75
Thailands Generals Dont Have an Economic Plan, Bloomberg View, August 4th 2015.
http://www.bloombergview.com/articles/2015-08-04/thailand-s-generals-don-t-have-an-economic-plan
72
45
Figure 44: Thailand Primary Energy Mix 1995 - 2014

140
120
Renewables
100
Wind
Solar
80
Hydro
60
Coal
Oil
40
Gas
20
0
1995
2000
2005
2010
Source: BP (2015)
As shown in Figure 44, the gas share of Thailands energy mix is substantial (39% in 2014), second
only to oil.

Thai gas consumption has steadily increased from 2000 (Figure 45). Although the power sector
dominates (where gas consumption has been stagnant for 2012-2014), industry and use as fuel in its
large gas separation plant (producing ethane, propane and other NGLs from domestic wet gas
production) are also significant.
46
Figure 45: Thailand Natural Gas Consumption 2000 - 2014

60
50
40
Bcma
Power Generation
Other/Unaccounted for
30
NGV's
Gas Separation Plant
Industry
20
10
0
2000
2005
2010
Source: EPPO (2015)

Note: Other/Unaccounted for is a balancing item.
On supply, Thailands domestic production appears to have reached a plateau (Figure 46). Thailand
imports gas from fields located offshore in the Myanmar sector of the Gulf of Thailand. Established
infrastructure configurations could serve to safeguard this gas for Thailand, despite a need for more
gas in Myanmar.
Thailand commenced LNG imports in 2011 through its Map Ta Phut regas terminal (capacity 7.3
bcm/y)76. If the IEAs expectation of rapid future declines in Thailands domestic production are borne
out77, Thailand will need to expedite plans for further LNG import capacity to maintain, let alone grow
gas demand.
76
77
GIIGNL (2014), P. 30
IEA (2015b), P. 42
47
Figure 46: Thailand Gas Supply 2000 - 2014

60
50
Bcma
40
LNG
30
Myanmar- Pipeline
Domestic Production
20
10
0
2000
2005
2010
Sources: EPPO (2015), GIIGNL (2014)
In its 2015 Power Development Plan78, Thailand assumes a growth in power demand of 3.9%/year.
Through expanding the role of renewables and hydro, it seeks to limit the growth in gas and coal-fired
generation. The plan also assumes nuclear power commencing in 2028.
2.5.2 Thailand Outlook

The Power Development Plan forms the basis of a reasoned, if somewhat speculative outlook for
Thailands future LNG requirements. On the demand side, power sector consumption is based on the
plan referred to above. Industry growth is assumed at 1.5%/year. Together with a 1%/year growth in
NGVs and other/unaccountable this would take Thailands gas consumption from 53.7 bcm in 2014
to 57.1 bcm in 2030. If we assume that Thailands domestic production, and the offshore Myanmar
fields exporting gas to Thailand begin their production decline in 2017 at 5%/year, Figure 47 paints a
picture of a growing and substantial market for LNG. LNG imports, on these assumptions, would in
2020 and 2025 be 11.0 and 20.4 bcm/y respectively.
78
Thailand (2015)
48
Figure 47: Thailand Gas Supply and Demand Outlook 2009 - 2030
70
60
50
40
Bcm/y
LNG
Myanmar- Pipeline
Domestic Production
30
Demand
20
10
0
2009
2014
2019
2024
2029
Sources: EPPO (2015), GIIGNL(2014), Authors assumptions.

Note: Reduction in demand in 2029 and 2030 is due to the governments assumed start of nuclear power.
Table 9 shows the outlook for LNG imports (high case) based on Figure 47. A low case was
constructed based on an assumption that domestic production in future declines at 2.5%/year (rather
than 5%), as a consequence of further exploration success and field development.
Table 9: Thailand LNG Import Outlook
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Low Case 0.0 1.1 1.4 2.0 1.9 3.7 3.9 4.9 7.0 9.0 11.0 13.0 14.9 16.7 18.6 20.4 22.1 23.8 25.5 21.3 22.5
High Case 0.0 1.1 1.4 2.0 1.9 3.7 3.9 4.9 8.0 11.0 13.9 16.7 19.4 21.9 24.4 26.8 29.1 31.3 33.4 29.6 31.2
Bcm/y
mtpa
Low Case
High Case
0.0
0.0
0.8
0.8
1.0
1.0
1.5
1.5
1.4
1.4
2.7
2.7
2.8
2.8
3.6
3.6
5.1
5.9
6.6 8.1 9.5 10.9 12.3 13.6 15.0 16.3 17.5 18.8 15.6 16.5
8.1 10.2 12.3 14.2 16.1 17.9 19.7 21.4 23.0 24.6 21.7 22.9
2.6 Indonesia
Comprising an archipelago of which the major islands are Sumatra, Java, Sulawesi, the southern part
of Borneo and the western section of New Guinea (Irian Jaya), Indonesia is a populous country (256
million) whose GDP (2014 data) comprises agriculture (14.2%), industry (45.5%) and services
(40.3%). Energy intensive industries include oil & gas, mining, chemicals, textiles, products derived
from processing agricultural inputs and tourism. 79 Indonesia has enjoyed consistently high GDP
79
CIA (2015a)
49
growth (average 2000-2014 5.3%)80, with positive growth maintained through the 2008/2009 financial
crisis period. Indonesia was (in 2014) the worlds third largest coal producer (after China and the
USA)81 and one of the worlds largest coal exporters. Indonesia became an LNG exporter in 1977 with
Japan as its first market (see Chapter 1) 82.

Figure 48: Indonesia Primary Energy Mix 1995-2014
200
180
160
140

Renewables
120
Hydro
100
Coal
80
Oil
60
Gas
40
20
0
1995
2000
2005
2010
Source: BP (2015)
As Figure 48 shows, gas consumption has been generally stagnant since the early 2000s while
overall energy consumption has grown by (on average) 4.1%/year. Coal has been the main
beneficiary. Indonesian domestic gas consumption trends are shown in Figure 49. Industry and power
generation are the key consumption sectors, which grew at 2.8% and 4%/year respectively on
average between 2010 and 2013. Note that in addition to the consumption categories shown in Figure
49, some Indonesian production is flared, consumed as own use, gas lift and reinjection, which may
explain the difference between the BP Statistical Review data and that in Figure 49.
80
World Bank (2015)

BP (2015).
82
Cedigaz (2004)
81
50
Figure 49: Indonesia Domestic Gas Consumption 2000 - 2013

35
30
25
City Gas
20
Bcma
Refinery
LPG Plant
Power
15
Industry
10
0
2000
2005
2010
Source: Indonesia (2014), pp. 82 83
Recent government policy moves to increase gas consumption to displace oil products are described
in Seah, S (2014)83. Achieving consistent future gas consumption growth will require the provision of
gas supply and distribution infrastructure across the archipelago, and this is progressing.
Figure 50 shows Indonesias total production and use of gas. Considerable volumes are used to
maintain oil field production (Gas Lift and Reinjection & Own Use) and flaring continues. The category
LNG plant field consumption appears high but probably includes significant statistical errors. The
scale of LNG and pipeline exports is evident.
83
Seah, S. (2014)
51
Figure 50: Indonesia Production and Consumption of Natural Gas 2000 - 2013
100
90
80
70
Export LNG
60
Export by Pipeline
Bcma
Domestic Demand
LNG Plant fuel Consumption (by Difference)
50
Flare
Own Use
40
Gas Lift and Reinjection
Production
30
20
10
2000
2005
2010
Source: Indonesia (2014), pp. 82 83
Indonesias pipeline exports to Singapore began in 2001 and to Malaysia in 2009 as shown in Figure
51. (Note again there appears some discrepancy between annual exports reported by the BP
Statistical Review of World Energy and Indonesia).
52
Figure 51: Indonesia Production and Use of Natural Gas 2000 - 2013
12
10
Bcma
Malaysia
Singapore
Indonesia Government Statistics
0
2000
2005
2010
Source: Indonesia (2014), pp. 82 83, BP (2015).
LNG exports from the early Bontang (Kalimantan) and Arun (Sumatra) plants declined in the early to
mid-2000s as fields supplying feed gas became depleted and domestic demand increased. The
Tangguh (Papua) project which started in 2009 to a degree stemmed this LNG export decline. Two
new liquefaction plants are under construction in Sulawesi - Donggi-Senoro (2 mtpa) and Sengkang
(0.5 mtpa). The Arun export facility on Sumatra is being converted to an import terminal 84. Indonesias
LNG story is thus evolving into one of intra-archipelago trade as well as being a net exporter of LNG.
Indonesias share of global LNG supply declines due to global and domestic demand growth, EIA, March 10 th 2014,
http://www.eia.gov/todayinenergy/detail.cfm?id=15331
84
53
Figure 52: Indonesia LNG Exports 2006 - 2014

35
30
25
Singapore
Thailand
Indonesia
20
Bcma
India
Mexico
Chile
15
China
Taiwan
South Korea
10
Japan
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: GIIGNL (2014)
Figure 52 shows Indonesias LNG exports by country of destination. The decline in output from
Bontang and Arun is reflected in the lower exports to Japan and Taiwan. The start-up of Tangguh
explains the increase in exports to South Korea and the start of exports to China as well as more
opportunistic cargoes to Mexico, India, Thailand and Singapore. Of note is the start of trade-flows
within the Indonesian archipelago from 2012.
2.6.2 Indonesia Outlook

The IEA 85 anticipates strong natural gas demand growth in Indonesia especially in the industrial
sector; growth between 2015 and 2020 of 4.1% is noted. Figure 53 shows Indonesias balance with a
post-2014 domestic demand growth assumption of just 2.3% per year and pipeline exports to
Singapore declining as noted previously. Assuming a future production decline (net of flaring,
reinjection and own use) of 5%/year (but with Tangguh expansion 5.2 bcm/y - starting in 2019),
Indonesia would become an LNG net importer by 2023 in the absence of significant new gas
discoveries. On these assumptions, its LNG net import requirement by 2025 would be some 5 bcm/y.
85
IEA (2015b), P. 41
54
Figure 53: Natural Gas Balance 2000-2030

100
80
60
LNG Export Surplus/Import

Requirement
Pipeline Exports
Bcm/y
40
Domestic Demand - LNG

Domestic Demand - Piped gas
20
Production (net of reinjection, own

use and flaring)
0
2000
2005
2010
2015
2020
2025
2030
-20
-40
Source: Indonesia (2014), pp. 82 83, BP (2015), Authors Assumptions
Table 10 shows the outlook for LNG imports (high case) based on Figure 53. A low case was
constructed based on an assumption that domestic production in future declines at 2.5%/year (rather
than 5%), as a consequence of further exploration success and field development. In the low case
Indonesia would still be a net exporter of LNG in 2025.
Table 10: Indonesia LNG Import Outlook
Bcm/y
mtpa
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Low Case 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 3.8 6.5 9.3
High Case 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 4.9 7.3 10.7 14.1 17.5 20.8
Low Case 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 2.8 4.8 6.9
High Case 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.4 3.6 5.4 7.9 10.4 12.9 15.3
2.7 Malaysia
Malaysias land mass is separated by the South China Sea into two similarly sized regions: Peninsula
Malaysia (north of Singapore) and East Malaysia (the northern part of the island of Borneo
excluding Brunei). Although Malaysia saw GDP falling 1.9% in 2009, its average annual GDP growth
55
from 2000 to 2014 was 5.1% 86 . Malaysia is an open upper-middle income economy. Formerly a
producer of raw materials, such as tin and rubber, in the 1970s, Malaysia now has a diversified
economy and has become a leading exporter of electrical appliances, electronic parts and
components, palm oil, and natural gas.
Malaysias energy mix is shown in Figure 54. Annual average energy consumption has grown by
4.3% between 2000 and 2014, gas consumption by 4.4% on average. Since 2000 coal consumption
has increased significantly although it still amounts to only 17% of the total energy mix.
Figure 54: Malaysia Energy Balance 1995 - 2014
100
90

Renewables
80
Millions of Tonnes Oil Equivalent
Wind
70
Solar
60
Hydro
50
Nuclear
40
Coal
30
Oil
20
Gas
10
0
1995
2000
2005
2010
Source: BP (2015)

Malaysias oil and gas industry commenced with Shell drilling an oil well in Sarawak in 1910. The
offshore discovery of large natural gas reserves in the 1960s resulted in the construction of the
Bintulu liquefaction plant87. Gas resources are chiefly offshore to the north west of Peninsula Malaysia
and north of the Sarawak region. More than 80% of domestic gas consumption is in Peninsula
Malaysia. LNG exports commenced in 1983 and pipeline gas exports to Singapore in 1992. Malaysia
imports pipeline gas from Indonesia, the Malaysia/Thailand Joint Development Area, and the
Malaysia-Vietnam Commercial Arrangement Area (CAA) 88. Malaysia also began importing LNG in
2013. (See Figure 55).
86
World Bank (2015)

The History of Shell in Malaysia, Shell Website, http://www.shell.com.my/aboutshell/who-we-are/history/malaysia.html
88
Malaysia (2014a), P.35
87
56
Figure 55: Malaysia Gas Supply: Production, Pipeline and LNG imports 2000-2014
90
80
70
60
Bcma
LNG Imports
50
Pipeline Imports (Indonesia,
Thailand & Vietnam)
40
Production
30
20
10
0
2000
2005
2010
Sources: BP Statistical Review of World Energy, GIIGNL, Malaysia Energy Statistics Handbook 2014, P. 23.
Note: Pipeline Supplies for 2013 and 2014 are estimates.
Figure 56 shows demand and exports of LNG and pipeline gas (to Singapore).
Figure 56: Malaysia Gas Demand and Exports: Consumption, Pipeline and LNG Exports 2000 2014
90
80
70
Bcma
60
50
Pipeline Exports (Singapore)

LNG Exports
40
Demand
30
20
10
0
2000
2005
2010
Sources: BP (2015), GIIGNL (2014), Malaysia (2014b), P. 23.

Note: Differing data sources result in a minor mismatch between Figures 55 and 56 in some years.
57
Gas consumption by sector in Malaysia in 2012 comprised: Power Generation 56%, Non-Energy
23%, Industry 20%, Transportation 1% and Residential and Commercial 0.1% 89 . Of the industrial
demand, 55% was consumed in rubber, food, beverage and tobacco, 20% in metal and non-metallic
mineral products, 8% in chemicals and others 17%90. This suggests that, in the absence of a highgrowth technology-based industrial sector, Malaysias future demand is primarily driven by the power
sector, although Figure 57 suggests that coal will supply incremental power demand growth in the
future.
Figure 57: Malaysia Power Generation by Fuel/Technology 2000 - 2012
160,000
140,000
120,000
100,000
Others
GWh
Hydro
Diesel
80,000
Oil
Coal
60,000
Gas
40,000
20,000
0
2000
2005
2010
Source: Malaysia (2014b), P. 33
Malaysian LNG imports in 2013 and 2014 were between 2 and 2.3 bcm from a range of countries,
including Algeria, Brunei, Nigeria and Yemen, primarily on the basis of spot or short term contracts.
LNG exports have grown slowly since 2006 to around 35 bcm/y and are primarily to Japan, South
Korea (declining), and Taiwan. Chinese deliveries have grown since 2009 and other minor spot trades
make up the difference. Future LNG contractual commitments fall significantly towards the end of the
2010s as shown in Figure 58.
89
90
Malaysia (2014a), P. 22
Malaysia (2014a), P. 23
58
Figure 58: Malaysia LNG Contract ACQs 2010-2030

35
30
25
Taiwan
20
Bcma
China
India
15
South Korea
Japan
10
0
2010
2015
2020
2025
2030
Source: GIIGNL (2014)
2.7.2 Outlook for Malaysian Gas

The outlook for natural gas in Malaysia is coloured by its maturity as a gas producing province (new
resources generally in deeper water) and the low regulated price in the Malaysian domestic market.
Coal has already established itself as the fuel to supply incremental power generation. Whilst higher
regulated gas prices would stimulate more domestic gas production this would enhance the
competitiveness of coal in the power sector, absent a more specific carbon abatement policy.
Malaysias 2014 CO2 emissions for reference were 4.3 times higher than in 1990 91. Malaysia has
embarked upon the use of LNG imports to supply the Malacca region on the Malaysian Peninsula and
has plans for further import terminals; one in the Sabah region (Island of Borneo) and another at
Johor on the Malaysian Peninsula92.
In addition to its existing land-based liquefaction facilities (Satu, Dua and Tiga), Malaysia is
progressing two or more small floating LNG production facilities offshore Sarawak and Sabah 93.
An illustrative supply outlook for Malaysia is shown in Figure 59. This assumes a decline in domestic
production of 2.5%/year from 2018, a gradual reduction in pipeline imports but a notional growth of
0.25 bcm/y in LNG imports.
91
BP (2015)
EIA (2014), P.13
93
EIA (2014), P.13
92
59
Figure 59: Malaysia Supply Outlook to 2030

90
80
70
Bcm/y
60
50
LNG Imports
40
Pipeline imports
Production
30
20
10
0
2000
2005
2010
2015
2020
2025
2030
Sources: BP (2015), GIIGNL (2014), Malaysia (2014b), P. 23. Authors Assumptions
On the Demand side, Figure 60 shows an assumed domestic demand growth of 1%/year, a tapering
in pipeline exports and LNG exports as a balancing item. LNG exports in all years to 2030 are in
excess of the aggregate ACQs of existing contracts.
Figure 60: Malaysia Demand and Export Outlook to 2030
90
80
70
Pipeline Exports
60
Bcm/y
LNG Exports
50
Domestic Demand met by LNG
Imports
40
Domestic Demand met by pipeline

imports
30
Domestic Demand met by

domestic production
20
10
0
2000
2005
2010
2015
2020
2025
2030
Sources: BP (2015), GIIGNL, Malaysia (2014b), P. 23, Authors Assumptions
60
The outlook for Malaysia is therefore one of a significant participant in LNG trade into the 2020s, but
one whose LNG export surplus is progressively declining due to the maturity of its gas resource.
For the cases considered, Malaysian LNG import volumes are as shown in Table 11. To 2025 there is
no difference in LNG imports.
Table 11: Malaysia LNG Import Outlook
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Low Case 0.0 0.0 0.0 2.0 2.2 2.1 2.7 3.0 3.2 3.5 3.7 4.0 4.2 4.5 4.7 5.0 5.2 5.5 5.7 6.0 6.2
High Case 0.0 0.0 0.0 2.0 2.2 2.1 2.7 3.0 3.2 3.5 3.7 4.0 4.2 4.5 4.7 5.0 5.2 5.5 5.7 8.2 10.7
Bcm/y
mtpa
Low Case 0.0 0.0 0.0 1.5 1.7 0.5 2.0 2.2 2.4 2.6 2.8 2.9 3.1 3.3 3.5 3.7 3.9 4.0 4.2 4.4 4.6
High Case 0.0 0.0 0.0 1.5 1.7 1.5 2.0 2.2 2.4 2.6 2.8 2.9 3.1 3.3 3.5 3.7 3.9 4.0 4.2 6.0 7.9
2.8 Pakistan
While Pakistans GDP growth from 2000 to 2014 averaged 4.2%/year 94 the country saw a degree of
stagnation post 2008. Pakistans problems include: corruption, lack of accountability, and lack of
transparency continue to pervade all levels of government, politics, and the military95,96. Agriculture,
industry and services in 2013 contributed 25.3%, 21.6% and 53.1% to GDP respectively97.
Figure 61: Pakistan Primary Energy Consumption 1995-2014
80
70
60
Bcma
50
Hydro
Nuclear
40
Coal
Oil
30
Gas
20
10
0
1995
2000
2005
2010
Source: BP (2015)
From Figure 61, Pakistans total energy consumption has plateaued since 2008.
94
World Bank (2015)

Gomes, I (2013)
96
2015 Index of Economic Freedom, http://www.heritage.org/index/country/pakistan
97
CIA (2015b)
95
61

Gas has consistently formed 50 to 55% of the energy mix, with coal between 5 and 8%. In 1952 some
10 tcf of gas was discovered in Balochistan. In addition to state-controlled companies, several
international companies are currently present in the Pakistan upstream. ENI is the largest
international player with production operations and participation in several offshore exploration blocks.
In 2014, Pakistan had no export or import trade flows in gas; its production and consumption from
1995 to 2014 is shown in Figure 62.
Figure 62: Pakistan Natural Gas Production and Consumption 1995 2014
50
45
40
35
Bcma
30
25
20
15
10
5
0
1995
2000
2005
2010
Source: BP (2015)
Pakistan has latent demand potential which is constrained by available supply. Gomes 98cites un-met
demand in 2012 of between 18 and 26 bcm/y, comprising potential for fuel oil switching in power
generation and industry and unutilised capacity. The scope for additional demand above available
domestic production is estimated at 13-26 bcm/y in 2015, rising to 41-49 bcm/y in 2020. Figure 63
shows the percentage share of gas consumption in various sectors in the fiscal years 1999/2000 to
2011/2012.
98
Gomes, I (2013)
62
Figure 63: Pakistan Gas Consumption Shares 1999/2000 2011/2012

100
90
80
70
Transport (CNG)
Share %
60
50
40
Industry
Power
Fertilizer
Cement
30
20
Commercial
Households
10
0
Source: Pakistan (2013), P. 191
In the early 2010s an assessment of Yet-to-Find reserves on an unrisked basis suggested 3.6 billion
of barrels of oil and 66.3 tcf of gas. However, over the last few years there has actually been a decline
in the countrys reported gas reserves. The situation is not helped by the low domestic price of gas
in 2012 some $5/MMBtu99.
The Iran Pipeline Project was first discussed in the early nineties. Plans to include India as a
secondary market foundered in the 2000s. Although it is alleged that Iran has completed 900 of the
1,150 km of this pipeline on its own territory, Pakistans section has yet to be built. While some of the
agreement suite appears to have been concluded, pricing has been revisited several times 100. This
said, the 2015/2016 rapprochement on Iranian nuclear issues and potential for lifting of sanctions
might in time allow the project to achieve completion101. Initial gas volumes are planned to be 7.8
bcm/y. The Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project was initiated in 2004.
The project was designed as an alternative to the Iranian Pipeline Project and while it has US State
Department support, in practical terms the security situation in Afghanistan renders its implementation
on hold for the foreseeable future.
In March 2015 Pakistan began importing LNG from Qatar and from July 2015, Nigeria. Using a
floating storage and re-gasification unit and ship-to-ship transfer, the gas is injected into the grid in the
vicinity of Karachi. In 2015, some 1.5 bcm was imported. Full regas capacity of this
system/configuration is 4 bcm/y102. Pakistan has signed a 15 year contract with Qatar for between 2
99
Gomes, I (2013), pp 15, 25

Gomes, I (2013), P.30
101
Will the Iran Deal Help the Iran-Pakistan Pipeline Project?, The Diplomat, July 28, 2015,
http://thediplomat.com/2015/07/will-the-iran-deal-help-the-iran-pakistan-pipeline-project/
102
Pakistan to join LNG Importers club soon, March 10th 2015, LNG World News, https://www.lngworldnews.com/pakistan-tojoin-lng-importers-club-soon/
100
63
and 4 bcm/y at prices of around $7/MMBtu at mid-2015 oil prices103. Plans are advanced to build a
second terminal of around 4 bcm/y capacity, operational in 2016/2017.
2.8.2 Pakistan Outlook

Figure 64 shows an illustrative outlook for Pakistans gas supply and demand position to 2030. The
notional Potential Demand is guided by research in Gomes, I (2013). Future domestic production
assumes a decline of 5%/year from 2016. Actual consumption (as it has been for the past few years)
will be a function of gas supply availability (and the ability of consumers to pay a cost reflective/market
price). This is predicated upon the successful conclusion of current and future LNG import projects
and the Iran Pakistan Pipeline (IPP).
Figure 64: Pakistan Gas Supply and Demand Outlook 1995 - 2030
80
70
60
LNG 6
LNG 5
Bcm/y
50
LNG 4
IPP
LNG 3
40
LNG 2
LNG 1
30
Domestic Production
Consumption
20
Potential Demand
10
0
1995
2000
2005
2010
2015
2020
2025
2030
Sources: Gomes, I (2013), P 11, BP (2015), Authors Assumptions.
While highly speculative, this view indicates an LNG import requirement for 2020 and 2025 of 12 and
16 bcm/y respectively, although this would not satisfy the potential country demand. This lagged
response will be due to a lack of focussed policy and detractions from powerful lobbies, project
execution delays, including finance concerns and end-user payment collection issues.
Pakistan LNG import volumes are as shown in Table 12. The high case corresponds to the discussion
above. A low case assumes a domestic production decline of 2.5%/year.
Pakistan to sign 15 year deal to import gas from Qatar official, ARY NEWS, July 29th, 2015, http://arynews.tv/en/pakistanto-sign-15-year-deal-to-import-gas-from-qatar-official/
103
64
Table 12: Pakistan LNG Import Outlook
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Low Case 0.0 0.0 0.0 0.0 0.0 1.4 4.0 4.0 6.0 8.0 10.0 12.0 12.0 12.0 12.0 14.0 14.0 14.0 14.0 14.0 14.0
High Case 0.0 0.0 0.0 0.0 0.0 1.4 4.0 6.0 8.0 10.0 12.0 12.0 12.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0
Bcm/y
mtpa
Low Case 0.0 0.0 0.0 0.0 0.0 1.1 2.9 2.9 4.4 5.9 7.4 8.8 8.8 8.8 8.8 10.3 10.3 10.3 10.3 10.3 10.3
High Case 0.0 0.0 0.0 0.0 0.0 1.1 2.9 4.4 5.9 7.4 8.8 8.8 8.8 8.8 10.3 11.8 13.2 14.7 16.2 17.6 19.1
2.9 Bangladesh
Bangladesh is one of the world's most densely populated countries; poverty is deep and widespread,
however in recent years it has reduced population growth and improved health and education. The
major employer is agriculture. The country is trying to diversify its economy, with industrial
development a priority. Bangladesh spent 15 years under military rule and, although democracy was
restored in 1990, the political scene remains volatile. Bangladeshs GDP growth has averaged
5.7%/year from 2000 to 2014, with no years of negative growth 104 . Pakistan Petroleum Limited
discovered gas at Sylhet in 1955, with commercial production commencing in 1960 with the supply of
4 mmcfd to a cement factory105.
Figure 65: Bangladesh Primary Energy Consumption 19952014
30
25
Renewables
Millions of TOnnes Oil Equivalent
Wind
20
Solar
Hydro
15
Nuclear
Coal
10
Oil
Gas
0
1995
2000
2005
2010
Source: BP (2015)
104
105
World Bank (2015)

Gomes, I (2013), P. 42
65
From Figure 65 it is evident that natural gas is the predominant primary energy source with coal
playing a minor if growing role.

Figure 66: Bangladesh Gas Consumption 1995 2014
25
20
15
Power
Tea Plantations
Industry
Fertiliser
10
Commercial
Domestic
Production
Source: Bangladesh (2014)
From Figure 66 it would appear that while most categories of demand have stabilised since 2009/10,
power generation is still on a generally rising trend. Potential gas demand in 2015 is some 10 bcm
above available supply in 2015106. However, with limited future prospectivity and low domestic prices,
the outlook for increased domestic production is not encouraging.
In 1997, Bangladesh expressed interest in a project to import pipeline gas from Myanmar, however
this was not progressed and, given Myanmars future gas pipeline export obligations, this is unlikely to
proceed in the future.
In 2010 Bangladesh announced its intention to build an LNG import terminal for 5 bcm/y, but this did
not materialise due to issues of buyer credit worthiness, poor infrastructure connectivity and the lack
of a strong project sponsor/financing 107. In 2015 however, Reliance Power signed an MOU to develop
a floating regas unit and associated power plant 108. In the absence of sufficient gas to meet latent
demand, Bangladesh is turning to coal and fuel oil in power generation.
106
Gomes, I (2013), P. 47
Gomes, I (2013), pp. 60, 61
108
Reliance Power to develop LNG Power Project, LNG Industry 8th June 2015, http://www.lngindustry.com/liquid-naturalgas/08062015/Bangladesh-LNG-power-project-moving-forward-909/
107
66
2.9.2 Bangladesh Outlook

Figure 67: Bangladesh Potential Gas Supply and demand to 2030
50
45
40
LNG 5
35
LNG 4
LNG 3
Bcma
30
LNG 3
25
LNG 2
LNG1
20
Domestic Production
15
Potential Demand
Demand
10
5
0
2000
2005
2010
2015
2020
2025
2030
Sources: BP (2015), Gomes, I (2013), Authors Assumptions
Figure 67 shows a potential outlook for Bangladesh supply and demand to 2030. Assuming domestic
production declines at 5%/year from 2018, LNG imports could maintain the recent trend of gas
consumption growth, although probably leaving substantial unmet demand potential. Bangladesh
LNG import volumes are as shown in Table 13. The high case corresponds to the discussion above.
A low case assumes a domestic production decline of 2.5%/year.
Table 13: Bangladesh LNG Import Outlook
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Bcm/y Low Case 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 4.0 4.0 4.0 6.0 8.0 8.0 10.0 12.0 14.0 16.0 18.0
High Case 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0
mtpa
Low Case 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 2.9 2.9 2.9 4.4 5.9 5.9 7.4 8.8 10.3 11.8 13.2
High Case 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 2.9 4.4 5.9 7.4 8.8 10.3 11.8 13.2 14.7 16.2 17.6 19.1
2.10 Vietnam
Vietnam has seen consistent high GDP growth with an annual average of 6.4% in the period 2000 to
2014 109 . The country has been transitioning from a centrally-planned economy since 1986.
Agriculture's share of economic output has shrunk from about 25% in 2000 to 18% in 2014, while
industry's share increased from 36% to 38% in the same period. State-owned enterprises now
account for about 40% of GDP. Vietnam joined the WTO in 2007, which has promoted more
109
World Bank (2015)
67
competitive, export-driven industries. Vietnam's economy continues to face challenges from an

undercapitalized banking sector and non-performing loans weigh heavily on banks and businesses 110.
Figure 68: Vietnam Primary Energy Consumption 1995 2014
70
60
50
40
Hydro
Coal
Oil
30
Gas
20
10
0
1995
2000
2005
2010
Source: BP (2015)

The modern natural gas industry was born in 1995, with the production of associated gas from the
Bach Ho oil field to the Ba Ria Power Plant which had an output of under 3 MMcm/d. In 2008,
Vietnam used about 90% of natural gas production for power generation with the remainder supplying
the industrial and fertilizer sectors. Gas made up about 50% of the power sector's generation
requirements in 2010. Gas markets could expand in the central and northern areas of Vietnam once
the pipeline infrastructure develops 111 . Vietnam's National Gas Master Plan projects that gas
consumption in the country will increase to over 13 bcm/y by 2015. In 2013, the IEA expected
Vietnams gas production to rise to 13 bcm/y (2014 production 10.2 bcm/y112) and remain at 12 bcm/y
till 2035. PetroVietnam predicts there will be a gas supply gap of 13 bcm/y by 2025 as demand
outstrips supply in the country
2.10.2 Vietnam Outlook

Vietnam has been expected to become an LNG importer for some while, however its two planned
regas terminal projects have been subject to rolling delays. The country had been expected to receive
its first cargo in 2018 or 2019 based on expectations that a PetroVietnam subsidiary had hoped to
award its first LNG contract in 2015 113 . The LNG is intended to be sold to industrial users and
fertilizer plants that buy gas at a price linked to alternative fuels such as oil, close to the world market
price for LNG. The reality of Vietnamese LNG imports appears however to be subject to rolling delays
at the time or writing.
110
CIA (2015a)
EIA (2012)
112
BP (2015)
113
Vietnam will need imports, but again delays its first LNG, Alaska Natural Gas Transportation Projects, December 8 th, 2014,
http://www.arcticgas.gov/2014/vietnam-will-need-imports-but-again-delays-its-first-lng
111
68
A low and high case for LNG imports is shown in Table 14, assuming a 4%/year future demand
increase and a 2.5% and 5% decline respectively in domestic production post 2020.
Table 14: Vietnam LNG Import Outlook
Bcm/y
Low Case
High Case
mtpa
Low Case
High Case
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 1.7 2.6 3.5 4.4 5.3 6.2 7.1 8.1 9.1
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.2 2.3 3.5 4.6 5.7 6.9 8.0 9.1 10.3 11.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.7
0.9
1.3
1.7
1.9
2.6
2.6
3.4
3.2
4.2
3.9
5.1
4.6
5.9
5.2
6.7
6.0
7.6
2.11 Conclusions - More Recent and Emerging Asian LNG Markets

Whilst it is difficult to draw common conclusions for such a diverse group of counties, it is perhaps
worth grouping these in terms of three drivers which will determine their future LNG import
requirements.
The first is the likely/impending decline in existing domestic production or pipeline gas supplies. This
is especially relevant where such supplies of natural gas historically have given rise to the situation
where gas has become a major share of the energy mix and where this would be difficult to markedly
reduce in the space of 5 to 10 years.
Countries where a decline in domestic production or pipeline gas supplies will likely lead to
increased LNG imports to 2025 are: Singapore (pipeline supply), Indonesia, Pakistan, Bangladesh,
Thailand, Malaysia and Vietnam.
The second driver is uncertainty around the future energy mix and government policy. Thus
Taiwan and China have the potential for increased LNG imports depending on their choice of coal
dependency levels (and GHG emission targets). This category also includes Thailand, India,
Malaysia, Pakistan and Bangladesh insofar as they may be unable to achieve acceptable (to other
COP21 parties and domestic populations) energy mixes without significantly increasing LNG imports
to displace coal, especially if renewables targets and energy efficiency goals are not met.
The third driver relates to investment frameworks and regulated domestic gas price levels. If
these are deficient they may slow the development of domestic gas resource but give rise to
increased LNG imports (albeit these may cost more in the short to medium term). Examples here are:
Bangladesh, Pakistan, Vietnam, Malaysia, India and Thailand.
Note that some recent and emerging LNG importing countries appear in more than one of the above
categories.
69
6.7
8.4
3. Summary and Conclusions

The preceding Chapters of this paper have reviewed the range of LNG import requirements for the
Asian markets, whether they are existing or prospective importers. Where possible a low and high
case has been derived for each country. The low case for Asia in total is shown in Figure 69 and the
high case in Figure 70.
Figure 69: Asian LNG Imports 2010-2030 Low Case
600
500
Vietnam
Bangladesh
Pakistan
400
Malaysia
Bcma
Indonesia
Thailand
300
Singapore
India
200
China
Taiwan
South Korea
100
0
2010
Japan
2015
2020
2025
2030
Source: Authors Analysis
70
Figure 70: Asian LNG Imports 2010-2030 High Case

600
500
Vietnam
Bangladesh
Pakistan
400
Malaysia
Bcma
Indonesia
Thailand
300
Singapore
India
200
China
Taiwan
South Korea
100
0
2010
Japan
2015
2020
2025
2030
In both the low and high cases the dominant markets, in terms of absolute volumes, are Japan, South
Korea, China and India. By 2030 the total LNG import volumes from all countries considered here
ranges from 385 to 530 bcm/y, compared with the 2015 total of 238 bcm/y. The annual average
aggregate growth in LNG demand is 3.3% (low case) and 5.5% (high case). It is instructive to look at
the country level variances between low and high cases shown in Figure 71, as this highlights the
key uncertainties for the period.
71
Figure 71: Asian LNG Imports 2010-2030 Differences between Low and High Cases
160
Vietnam
140
Bangladesh
120
Pakistan
Malaysia
Bcma
100
Indonesia
Thailand
80
Singapore
60
India
China
40
Taiwan
20
South Korea
Japan
0
2010
2015
2020
2025
2030
China and Japan dominate the picture between 2015 and the early 2020s. In the case of China the
uncertainties relate to gas demand growth in the economic new normal where government policy will
be crucial in establishing a more material role for gas in the power sector (for CO 2 and particulate
pollution abatement reasons) and in providing access infrastructure to enable growth in the residential
and industrial sector. The future LNG requirement is also however subject to uncertainties in the gas
supply mix; including conventional and unconventional domestic gas production, the scale of future
pipeline imports from Turkmenistan and Central Asian and Russian pipeline gas from East and West
Siberia. With Japan the main uncertainty is the pace and extent of the start-up of nuclear power plant,
reducing the requirement for LNG imports and achieving long term energy efficiency goals.
In the case of Taiwan and South Korea, the scale of future LNG imports depends on uncertain
economic growth prospects and energy mix policy. India poses a specific problem. The lack of a
clearly defined role for gas in national energy policy, a muddled regulated pricing policy and no clear
plans for transmission system development make it difficult to project demand for gas and LNG in this
potentially large market. With Thailand, Indonesia, Malaysia and Vietnam a major uncertainty is the
future decline of domestic production as exploration prospectivity declines due to province maturity,
often exacerbated by low regulated domestic pricing policies. While the future scope of LNG imports
is difficult to ascertain this is likely to be an increasingly widespread dynamic and an important source
of new global LNG demand in markets where natural gas already has a strong presence. The same
issue applies to Pakistan and Bangladesh but with the added complication of delays to building import
infrastructure due to poor investment frameworks, governance or end user credit-worthiness. This
highlights an opportunity for future LNG supply projects, but it requires a markedly more pro-active
marketing stance and credit-risk management capability than has traditionally been the case in the
LNG business. The use of floating LNG regas units however is an added incentive to ensure that LNG
supplied is paid for.
The high and low LNG import cases to 2025 are shown in Table 15.
72
Table 15: High and Low LNG Import Cases to 2030 (bcm/y)
Low Case
2010
2015
2020
2025
2030
Japan
96.4
115.7
86.0
86.5
80.6
South Korea
44.4
45.5
44.8
45.8
47.5
Taiwan
15.2
19.7
20.3
21.6
22.9
China
13.1
27.2
54.0
46.0
75.0
India
12.2
19.9
30.0
50.0
66.0
Singapore
2.8
6.6
10.7
13.8
Thailand
3.7
11.0
20.4
22.5
Indonesia
9.3
Malaysia
2.1
3.7
5.0
6.2
Pakistan
1.4
10.0
14.0
14.0
Bangladesh
4.0
8.0
18.0
Vietnam
4.4
9.1
Total
181.3
237.9
270.4
312.3
384.9
2010
96.4
44.4
15.2
13.1
12.2
181.3
2015
115.7
45.5
19.7
27.2
19.9
2.8
3.7
2.1
1.4
237.9
High Case
2020
124.6
46.9
22.4
79.0
36.0
6.9
13.9
3.7
12.0
6.0
351.6
2025
124.7
49.6
26.8
66.0
60.0
11.4
26.8
4.9
5.0
16.0
16.0
5.7
412.9
In summary the picture presented in this paper is one of LNG having to shed its mantle of a premium
fuel whose import price is linked to that of oil and re-market itself as fuel which can contribute to a
lower carbon future, by displacing coal in national energy mixes, and equally importantly reducing
particulate emissions. This however calls for a radical renaissance in marketing by upstream LNG
producers and strenuous efforts in cost reduction through competition in the liquefaction equipment
sector.
73
2030
120.3
52.7
32.1
105.0
79.2
14.9
31.2
20.8
10.7
26.0
26.0
11.4
530.1
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Asian LNG Demand 2016

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April 2016

Asian LNG Demand:

OIES PAPER: NG 106

March 2016: Asian LNG Demand: Key Drivers and Outlook

March 2016: Asian LNG Demand: Key Drivers and Outlook

March 2016: Asian LNG Demand: Key Drivers and Outlook

2.10 Vietnam ..................................................................................................................................... 67

March 2016: Asian LNG Demand: Key Drivers and Outlook

Figure 36: Primary Energy Mix of India 1995 to 2014 .......................................................................... 37

March 2016: Asian LNG Demand: Key Drivers and Outlook

March 2016: Asian LNG Demand: Key Drivers and Outlook

Annual Contract Quantity

Billion cubic feet

Billion cubic feet/day

Billion cubic metre

Billion cubic metres/annum (year)

Billion cubic metres/year

Billion meaning 1000 million or 10 E9

Value of LNG expressed as US$ per million Btu

Exploration and Production

US Energy Information Administration

Final Investment Decision

The storage of natural gas in either underground structures such as depleted

Groupe International des Importateurs de Gaz Naturel Liqufi (International

International Energy Agency

A large scale processing plant in which natural gas is cryogenically cooled to

March 2016: Asian LNG Demand: Key Drivers and Outlook

Million cubic metres

Thousand cubic metres

Million British thermal units

Million tonnes of oil equivalent

Million tonnes per annum

Natural gas liquids

The process of reinstating LNG to a gaseous state for injection into a

The amount of gas underground that can be commercially recovered

Short term LNG

Single cargo of LNG sold outside of a term contract

Trillion cubic feet

Trillion cubic metres

March 2016: Asian LNG Demand: Key Drivers and Outlook

1. Mature Asian LNG Markets

IIGC (2015), pp. 4-5.

Geothermal, Biomass & Other

1.2.2 Gas Consumption, Energy Policy and Future Outlook

Source: IEEJ (2015a), P 184

Miyamoto, A. (2008), Figure 4.1, P 127.

Figure 3: Japan Industry Sources of Energy FY 2000 - 2013

Coal & Coal Products

Source: IEEJ (2015a), P 68

Miyamoto, A., Ishiguro, C. & Nakamura, M, (2012)

Source: IEEJ (2015a), pp. 196 & 197.

Figure 6: Fuel Consumption for Electricity Generation (General Electric Utilities)

Heavy Fuel Oil

Source: IEEJ (2015a), P. 210

Nuclear Power in Japan, July 2015, World Nuclear Association, http://www.world-nuclear.org/info/Country-Profiles/CountriesG-N/Japan/

Figure 7: Japan Nuclear Re-Start Scenarios

GWh Nuclear Generation

Source: Authors Assumptions

IEEJ (2015b), Slide 9

Figure 8: Future Power Generation Gas Consumption for Six Cases

Fast Nuclear restart, low demand

Partial Nuclear Restart, Low Demand

Slow Nuclear Restart, Low Demand

Source: Authors Calculations